TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED 2011 ... · TAIWAN SEMICONDUCTOR MANUFACTURING...
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TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED 2011 ANNUAL GENERAL SHAREHOLDERS' MEETING MINUTES (Translation) Time and Date: 9:00 a.m., June 9, 2011 Place: TSMC Fab 12 (No. 8, Li-Hsin Road 6, Hsinchu Science Park, Hsin-Chu, Taiwan, R.O.C.) Total outstanding TSMC shares: 25,914,283,114 shares Total shares represented by shareholders present in person or by proxy: 23,066,704,055 shares Percentage of shares held by shareholders present in person or by proxy: 89.01% Chairman: Dr. Morris Chang, the Chairman of the Board of Directors Recorder: Sylvia Fang The aggregate shareholding of the shareholders present in person or by proxy constituted a quorum. The Chairman called the meeting to order. A. Chairman's Address (omitted) B. Report Items I. Reported the business of 2010. (see Attachment I) II. Audit Committee's review report. (see Attachment II) (Shareholders' questions and the management's responses omitted.) C. Resolutions I. The 2010 Business Report and Financial Statements were submitted at the meeting for acceptance. (Proposed by the Board of Directors) Explanatory Notes: (1) TSMC's 2010 Financial Statements, including Balance Sheets, Income Statements, Statements of Changes in Shareholders' Equity, and Cash Flow Statements, were audited by independent auditors, Mr. Hung-Peng Lin and Mr. Shu-Chieh Huang, of Deloitte & Touche. (2) The 2010 Business Report, independent auditors' audit report, and the above-mentioned Financial Statements were attached hereto as Attachments I, III and IV. - 1 -
Transcript of TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED 2011 ... · TAIWAN SEMICONDUCTOR MANUFACTURING...
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED 2011 ANNUAL GENERAL SHAREHOLDERS' MEETING
MINUTES (Translation)
Time and Date: 9:00 a.m., June 9, 2011 Place: TSMC Fab 12 (No. 8, Li-Hsin Road 6, Hsinchu Science Park, Hsin-Chu, Taiwan, R.O.C.) Total outstanding TSMC shares: 25,914,283,114 shares Total shares represented by shareholders present in person or by proxy: 23,066,704,055 shares Percentage of shares held by shareholders present in person or by proxy: 89.01% Chairman: Dr. Morris Chang, the Chairman of the Board of Directors Recorder: Sylvia Fang The aggregate shareholding of the shareholders present in person or by proxy constituted a quorum. The Chairman called the meeting to order. A. Chairman's Address (omitted) B. Report Items
I. Reported the business of 2010. (see Attachment I)
II. Audit Committee's review report. (see Attachment II)
(Shareholders' questions and the management's responses omitted.) C. Resolutions
I. The 2010 Business Report and Financial Statements were submitted at the meeting for acceptance. (Proposed by the Board of Directors)
Explanatory Notes: (1) TSMC's 2010 Financial Statements, including Balance
Sheets, Income Statements, Statements of Changes in Shareholders' Equity, and Cash Flow Statements, were audited by independent auditors, Mr. Hung-Peng Lin and Mr. Shu-Chieh Huang, of Deloitte & Touche.
(2) The 2010 Business Report, independent auditors' audit report, and the above-mentioned Financial Statements were attached hereto as Attachments I, III and IV.
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Voting Results: 23,066,601,020 shares were represented at the time of voting; 18,939,484,428 shares voted for the proposal, representing 82.11% of the total represented shares present; no votes were cast against the proposal; 4,127,116,592 votes were either invalidly cast or abstained, representing 17.89% of the total represented shares present.
RESOLVED, that the 2010 Business Report and Financial Statements be and hereby were accepted as submitted.
II. A proposal to approve the distribution of 2010 profits was submitted at the
meeting for discussion and approval. (Proposed by the Board of Directors)
Explanatory Notes: (1) The proposed profits distribution was allocated from the 2010 Retained Earnings Available for Distribution. Each common share holder would be entitled to receive a cash dividend of NT$3 per share. The total amount of common shares outstanding might change and the ultimate cash dividend to be distributed to each common share might need to be adjusted accordingly should TSMC subsequently repurchase its common shares or issue new common shares to its employees as a result of their exercise of stock options. It was proposed that the Chairman of Board of Directors of TSMC be authorized to adjust the cash dividend to be distributed to each common share based on the total amount of profits resolved to be distributed and the number of actual common shares outstanding on the record date for distribution.
(2) The 2010 Profit Allocation Proposal was attached hereto as Attachment V.
Voting Results: 23,066,601,020 shares were represented at the time of voting;
18,894,432,703 shares voted for the proposal, representing 81.91% of the total represented shares present; 45,890,812 shares voted against the proposal, representing 0.20% of the total represented shares present; 4,126,277,505 votes were either invalidly cast or abstained, representing 17.89% of the total represented shares present.
RESOLVED, that the above proposal be and hereby was approved as proposed.
III. It was proposed to approve revisions to internal rules as follows:
(1) Procedures for Lending Funds to Other Parties (2) Procedures for Endorsement and Guarantee (Proposed by the Board of Directors)
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Explanatory Notes: (1) The Financial Supervisory Commission of the Executive Yuan amended its "Guidelines for Fund-Lending and Providing Endorsements and Guarantees by Public Companies". Therefore, TSMC's "Procedures for Lending Funds to Other Parties" and "Procedures for Endorsement and Guarantee" should be amended to reflect the regulatory changes. In addition, other changes were made for clarification purposes and to suit TSMC's business needs.
(2) Comparison tables for the above-mentioned internal rules before and after revisions were attached hereto as Attachments VI and VII.
Voting Results: 23,066,601,020 shares were represented at the time of voting;
18,898,459,392 shares voted for the proposal, representing 81.93% of the total represented shares present; 4,644,564 shares voted against the proposal, representing 0.02% of the total represented shares present; 4,163,497,064 votes were either invalidly cast or abstained, representing 18.05% of the total represented shares present.
RESOLVED, that the above proposal be and hereby was approved as proposed.
IV. It was proposed to approve the transfer of TSMC's solar business and solid state
lighting business into two new TSMC wholly owned companies respectively, and to further approve the "Solar Business Transfer Plan" and "Solid State Lighting Business Transfer Plan". (Proposed by the Board of Directors)
Explanatory Notes: (1) To foster a stronger sense of corporate entrepreneurship
and facilitate business specializations in order to strengthen overall profitability and operational efficiency, it was proposed to approve the transfer of TSMC's solar business (including all operations, assets and liabilities) and solid state lighting business (including all operations, assets and liabilities) into two new TSMC wholly owned companies, "TSMC Solar Ltd." and "TSMC Solid State Lighting Ltd." respectively (the "Transfers"). In return, TSMC will receive equivalent value of new shares to be issued by the two companies.
(2) TSMC prepared the Business Transfer Plans, and the relevant attachments, in accordance with the Taiwan Business Merger and Acquisition Law, the Company Law and other relevant laws and regulations. The Business Transfer Plans were attached hereto as Attachment VIII.
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(3) After TSMC shareholders' approval, the Board of Directors shall be authorized to make any required adjustments or modifications to the Business Transfer Plans allowed under relevant laws and regulations (including, but not limited to, the specific items and the amount of assets and liabilities to be transferred, the transfer record date and time schedule, the number of shares to be issued by the new companies, etc.).
(4) The Chairman and his designee(s) shall have authority to sign on behalf of TSMC all agreements and documents in connection with the Transfers (including but not limited to the Business Transfer Plans).
(Shareholders' questions and the management's responses omitted.)
Voting Results: A total of ten shareholders objected to the above proposal in
writing before this meeting and waived their voting rights for this proposal, totaling 46,449,251 votes. Two of the ten shareholders were not present in person, and the shares of the other eight shareholders, totaling 46,397,955 votes, were not included in the number of shares represented by the shareholders present at the time of voting.
Subject to the above, 23,020,203,065 shares were represented at the time of voting; 18,897,916,911 shares voted for the proposal, representing 82.09% of the total represented shares present; no votes were cast against the proposal; 4,122,286,154 votes were either invalidly cast or abstained, representing 17.91% of the total represented shares present.
RESOLVED, that the above proposal be and hereby was approved as proposed.
D. Directors Election
Election of two additional Independent Directors (Proposed by the Board of Directors)
Election Result: Two independent directors were elected by the shareholders
present. The term of the newly elected independent directors commences on June 9, 2011 and shall expire on June 9, 2012. The list of the newly elected independent directors with votes received follows:
Name Votes Received Gregory C. Chow 18,739,918,153 Kok-Choo Chen 18,739,916,123
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E. Special Motion There being no other business and special motion, upon a motion duly made and seconded, the meeting was adjourned.
____________________________ ____________________________ Morris Chang Sylvia Fang Chairman of the Board of Directors Recorder
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Business Report
2010 was a year of record high revenue and profit for TSMC. Amid gradual recovery of
the global economy, semiconductor industry revenue grew 31% in 2010. Meanwhile,
TSMC's revenue grew 48% in US dollars compared with 43% for the overall foundry
segment. Our growth momentum was fueled by both timely addition and fast ramp-up of
capacity, wide customer adoption of our advanced technologies, and a strong growth in
specialty technology revenue.
TSMC's strong performance delivered in 2010 reflected our trinity of strengths:
technology leadership, manufacturing excellence, and customer partnership. Significant
achievements included:
• We operated at full production utilization rate averaged across all fabs throughout
the year, and have installed 14 percent more capacity overall, with an increase of
37 percent in capacities at 12" wafer fabs.
• We deployed over 157 technologies, and manufactured more than 8,300 products
for more than 450 customers over the course of 2010.
• In 2010, we fast ramped-up to full production of our 40/45-nanometer technology,
which generated 17 percent of total wafer revenue, with considerable market share,
and margins that approached the corporate average by year's end.
• Following on the success of our 65- and 40-nanometer process technology
productions, development of our 28-nanometer products -- three high-k metal gate
processes and one conventional silicon oxynitride (SiON) process -- proceeded as
planned with record customer engagements.
Financial Performance
Consolidated revenue for 2010 totaled NT$419.54 billion, an increase of 41.9 percent
over NT$295.74 billion in 2009. Net income was NT$161.61 billion or 81.1 percent
above NT$89.22 billion the previous year. Diluted earnings per share were NT$6.23, up
81.1 percent compared with NT$3.44 in 2009.
ATTACHMENT I
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In US dollars, TSMC generated net income of US$5.13 billion on consolidated revenue
of US$13.32 billion, compared with net income of US$2.71 billion on consolidated
revenue of US$9.0 billion for 2009.
Gross profit margin was 49.4 percent compared with 43.7 percent in 2009, with
Operating Profit Margin of 37.9 percent compared with 31.1 percent a year earlier. Net
profit margin reached 38.5 percent, an increase of 8.3 percentage points from the 2009's
level. TSMC shipped 11.86 million eight-inch equivalent wafers compared with 7.74
million wafers a year ago.
Expanding Growth
In 2010, TSMC took important steps to further our development of advanced
technologies and to accelerate capacity expansion.
In expanding our technology leadership we have spent considerable resources for R&D.
2010 R&D capital expenditure was US$355 million, 85% higher than 2009, while regular
R&D budget also increased by about 40% to US$940 million. The major focus of these
investments is further development of 28-, 20-, and 14-nanometer technologies and
exploratory work on 10- and 7-nanometer technologies.
In 2010, TSMC spent a record of US$5.94 billion on capital expenditures to meet the
capacity needs of our customers. Although we exerted our utmost efforts to accelerate
capacity expansion, we still had sizeable unfilled requests for capacity from customers by
the end of 2010.
Having already invested additional capital to expand capacity at our two existing 12-inch
GIGAFABTM facilities, Fab 12 in Hsinchu and Fab 14 in Tainan, we began construction
last July on our third GIGAFABTM, Fab 15, in Taichung's Central Taiwan Science Park.
Meanwhile, we also obtained a new site in the Hsinchu Science Park for sub-14-
nanometer R&D.
TSMC also is actively pursuing new revenue opportunities that leverage our
technological strengths, engineering capabilities, and experiences in large-scale
manufacturing. During the year, construction was begun on TSMC's first solid-state
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lighting facility in Hsinchu to pursue opportunities in the lighting industry. We also
began construction on our first Thin Film Solar R&D Center and Fab in Taichung, laying
the foundation for TSMC's entry into the thin-film solar photovoltaic market serving the
solar energy market. Each of these initiatives represents an opportunity for TSMC to
establish a significant foothold in the emerging green energy industries.
Technological Developments
At this time, TSMC's 28-nanometer technology is industry leading and production ready.
We have achieved, in the R&D phase, superior performance, reliability and density,
which is 2 times over that of 40-nanometer, using our gate-last high-k metal-gate process.
A few customer products have already taped out and are in prototyping. Meanwhile, our
28-nanometer lead-free bumping is eco-friendly and compatible with superior low-
resistance ELK interconnect.
In addition to our efforts in pushing Moore's Law with advanced geometries, we have
also spent considerable resources in developing specialty technologies to capture both the
market trend of integrating more specialty features with CMOS logic, and the trend of
continuing scaling down the geometries for cost and form factor advantages.
TSMC's technology leadership in these specialty technologies includes both feature
improvement and the ability to further shrink the geometries. We have already achieved
some industry leading results. For example: we plan to use 65- and 90-nanometer
processes to deliver engine control processes for automotive ICs, and we use 65-
nanometer and back-side illumination (BSI) technology to achieve the best quantum
efficiency for CMOS image sensors. For embedded DRAM, we use 40-nanometer to
deliver the fastest network processors; and for embedded Flash, we use 0.11-micron to
enable ultra low leakage micro controller unit (MCU) of one pico amp per micron
(1pA/um). For MEMS, we use 0.18-micron to complete three-dimensional CMOS-
MEMS integration; and for power IC, we use 0.18-micron to achieve the lowest turn-on
resistance (Ron) in the industry.
Our efforts in both Moore's Law progression and specialty technologies have encouraged
many customers to expand their engagements with TSMC.
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Honors and Awards
In 2010, TSMC continued to garner recognition and awards from around the world as a
corporate role model. Our commitment to creating shareholder value and to corporate
social responsibilities have won top honors from AsiaMoney, FinanceAsia, IR Magazine,
Corporate Governance Asia, CommonWealth Magazine, and GlobalView Magazine in
the areas of corporate governance, management, investor relations and corporate social
responsibilities. We received again the Corporate Social Responsibility (CSR) "Gold
Award," the highest honor bestowed by the Taiwan Institute for Sustainable Energy, and
were chosen the Semiconductor Sector Leader in Dow Jones Sustainability Index (DJSI)
2010 Survey. TSMC has been a DJSI component for 10 consecutive years.
Citing "outstanding leadership in the semiconductor industry", Institute of Electrical and
Electronics Engineers (IEEE) has named me the recipient of the 2011 IEEE Medal of
Honor. I believe the honor belongs to the entire TSMC.
Outlook
Recovery of the global economic condition is likely to continue into 2011. Global
semiconductor revenue growth is forecast to be about 5 percent, while the foundry
segment is forecast to outpace the overall semiconductor industry at a growth rate of
about 15 percent in 2011. Because TSMC possesses the right technologies, effective
capacity, and we continue to earn the trust of our customers, we are well positioned to
capture greater share within the dedicated foundry segment and to continually deliver
growth and profitability for our shareholders.
February 15, 2011
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ATTACHMENT II
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INDEPENDENT AUDITORS’ REPORT The Board of Directors and Shareholders Taiwan Semiconductor Manufacturing Company Limited We have audited the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company Limited as of December 31, 2010 and 2009, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Taiwan Semiconductor Manufacturing Company Limited as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting with respect to financial accounting standards, and accounting principles generally accepted in the Republic of China. As discussed in Note 3 to the financial statements, effective January 1, 2009, Taiwan Semiconductor Manufacturing Company Limited adopted the newly revised Statement of Financial Accounting Standards No. 10, “Accounting for Inventories.”
ATTACHMENT III
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We have also audited, in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China, the consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of and for the year ended December 31, 2010 on which we have issued an unqualified opinion and as of and for the year ended December 31, 2009 on which we have issued an unqualified opinion with an explanatory paragraph relating to the adoption of the newly revised Statement of Financial Accounting Standards No. 10, “Accounting for Inventories.” January 24, 2011
Notice to Readers The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdiction. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China. For the convenience of readers, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.
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06 th
ousa
nd sh
ares
in 2
009
259,
100,
787
3725
9,02
7,06
645
Net
pro
perty
, pla
nt a
nd e
quip
men
t
36
6,85
4,29
9
52
25
4,75
1,52
644
CA
PITA
L SU
RPL
US
(Not
es 2
and
20)
55,6
98,4
34
855
,486
,010
10
IN
TAN
GIB
LE A
SSET
S
RET
AIN
ED E
AR
NIN
GS
(Not
e 20
)
Goo
dwill
(Not
e 2)
1,
567,
756
-
1,
567,
756
-A
ppro
pria
ted
as le
gal c
apita
l res
erve
86,2
39,4
94
1277
,317
,710
13D
efer
red
char
ges,
net (
Not
es 2
and
13)
5,
456,
427
1
5,
891,
685
1A
ppro
pria
ted
as sp
ecia
l cap
ital r
eser
ve
1,
313,
047
--
-
Una
ppro
pria
ted
earn
ings
178,
227,
030
2610
4,56
4,97
218
Tota
l int
angi
ble
asse
ts
7,02
4,18
3
1
7,45
9,44
11
265,
779,
571
3818
1,88
2,68
231
OTH
ER A
SSET
S
D
efer
red
inco
me
tax
asse
ts (N
otes
2 a
nd 1
8)
7,15
4,26
6
1
7,76
3,64
31
OTH
ERS
(Not
es 2
and
23)
R
efun
dabl
e de
posi
ts
8,63
8,74
9
2
2,69
8,11
61
Cum
ulat
ive
trans
latio
n ad
just
men
ts
(6
,543
,163
) (1
)(1
,766
,667
)-
Oth
ers (
Not
es 2
and
24)
1,
420,
131
-
49
4,54
6-
Unr
ealiz
ed g
ain
on fi
nanc
ial i
nstru
men
ts
10
9,28
9 -
453,
621
-
To
tal o
ther
ass
ets
17,2
13,1
46
3
10
,956
,305
2
(6
,433
,874
) (1
)(1
,313
,046
)-
Tota
l sha
reho
lder
s’ e
quity
574,
144,
918
8249
5,08
2,71
286
TO
TAL
$
701
,239
,666
10
0
$ 5
77,4
26,6
2210
0TO
TAL
$
701
,239
,666
10
0$
577,
426,
622
100
The
acco
mpa
nyin
g no
tes a
re a
n in
tegr
al p
art o
f the
fina
ncia
l sta
tem
ents
. (W
ith D
eloi
tte &
Tou
che
audi
t rep
ort d
ated
Janu
ary
24, 2
011)
- 13 -
Taiwan Semiconductor Manufacturing Company Limited STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2010 2009 Amount % Amount % GROSS SALES (Notes 2 and 24) $ 418,666,448 $ 299,471,214 SALES RETURNS AND ALLOWANCES (Notes 2
and 8) 11,703,136 13,728,346 NET SALES 406,963,312 100 285,742,868 100 COST OF SALES (Notes 3, 9, 19 and 24) 209,921,268 52 159,106,619 56 GROSS PROFIT 197,042,044 48 126,636,249 44 UNREALIZED GROSS PROFIT FROM
AFFILIATES (Note 2) 52,742 - 160,279 - REALIZED GROSS PROFIT 196,989,302 48 126,475,970 44 OPERATING EXPENSES (Notes 19 and 24)
Research and development 27,623,299 7 19,688,032 7General and administrative 11,681,756 3 10,238,131 3Marketing 2,837,739 - 2,027,454 1
Total operating expenses 42,142,794 10 31,953,617 11
INCOME FROM OPERATIONS 154,846,508 38 94,522,353 33 NON-OPERATING INCOME AND GAINS
Equity in earnings of equity method investees, net (Notes 2 and 10) 7,111,443 2 - -
Settlement income (Note 27) 6,939,764 2 1,464,915 1Interest income 764,027 - 1,117,374 -Technical service income (Notes 24 and 27) 446,746 - 375,118 -Valuation gain on financial instruments, net
(Notes 2, 5 and 23) 312,862 - 587,151 -Others (Notes 2 and 24) 333,126 - 576,951 -
Total non-operating income and gains 15,907,968 4 4,121,509 1
(Continued)
- 14 -
Taiwan Semiconductor Manufacturing Company Limited STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2010 2009 Amount % Amount % NON-OPERATING EXPENSES AND LOSSES
Loss on disposal of property, plant and equipment(Note 2) $ 838,750 - $ 58,242 -
Interest expense 214,641 - 142,026 -Casualty loss (Note 9) 190,992 - - -Foreign exchange loss, net (Note 2) 58,737 - 630,455 -Equity in losses of equity method investees, net
(Notes 2 and 10) - - 2,695,720 1Others (Note 2) 161,152 - 136,397 -
Total non-operating expenses and losses 1,464,272 - 3,662,840 1
INCOME BEFORE INCOME TAX 169,290,204 42 94,981,022 33 INCOME TAX EXPENSE (Notes 2 and 18) 7,685,195 2 5,763,186 2 NET INCOME $ 161,605,009 40 $ 89,217,836 31 2010 2009 Before
Income Tax
After Income
Tax
Before Income
Tax
After Income
Tax EARNINGS PER SHARE (NT$, Note 22)
Basic earnings per share $ 6.53 $ 6.24 $ 3.68 $ 3.45Diluted earnings per share $ 6.53 $ 6.23 $ 3.67 $ 3.44
The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated January 24, 2011) (Concluded)
- 15 -
Tai
wan
Sem
icon
duct
or M
anuf
actu
ring
Com
pany
Lim
ited
STA
TE
ME
NT
S O
F C
HA
NG
ES
IN S
HA
RE
HO
LD
ER
S ’ E
QU
ITY
FO
R T
HE
YE
AR
S E
ND
ED
DE
CE
MB
ER
31,
201
0 A
ND
200
9 (I
n T
hous
ands
of N
ew T
aiw
an D
olla
rs, E
xcep
t Div
iden
ds P
er S
hare
)
Oth
ers
Unr
ealiz
ed
Cap
ital S
tock
- C
omm
on S
tock
R
etai
ned
Ear
ning
s
Cum
ulat
ive
Gai
n(L
oss)
on
Tot
al
Sh
ares
L
egal
Cap
ital
Spec
ial C
apita
l U
napp
ropr
iate
d
T
rans
latio
n
Fina
ncia
l Sh
areh
olde
rs’
(In
Tho
usan
ds)
A
mou
nt
Cap
ital S
urpl
usR
eser
veR
eser
veE
arni
ngs
Tot
al
A
djus
tmen
ts
Inst
rum
ents
Equ
ity
B
ALA
NC
E, JA
NU
AR
Y 1
, 200
9
25
,625
,437
$ 2
56,2
54,3
73
$49
,875
,255
$67
,324
,393
$39
1,85
7$
102,
337,
417
$17
0,05
3,66
7
$
481,
158
$(2
87,3
42)
$47
6,37
7,11
1
A
ppro
pria
tions
of p
rior y
ear’
s ear
ning
s
Le
gal c
apita
l res
erve
-
- -
9,99
3,31
7-
(9,9
93,3
17)
-
-
--
Rev
ersa
l of s
peci
al c
apita
l res
erve
-
- -
-(3
91,8
57)
391,
857
-
-
--
Cas
h di
vide
nds t
o sh
areh
olde
rs -
NT$
3.00
per
shar
e
-
- -
--
(76,
876,
312)
(76,
876,
312)
-
-(7
6,87
6,31
2)St
ock
divi
dend
s to
shar
ehol
ders
- N
T$0.
02 p
er sh
are
51,2
51
512,
509
--
-(5
12,5
09)
(512
,509
)
-
--
Prof
it sh
arin
g to
em
ploy
ees -
in st
ock
141,
870
1,41
8,69
9 6,
076,
289
--
--
- -
7,49
4,98
8C
apita
l sur
plus
tran
sfer
red
to c
apita
l sto
ck
76,8
76
768,
763
(768
,763
)-
--
-
-
--
Net
inco
me
in 2
009
-
-
--
-89
,217
,836
89,2
17,8
36
- -
89,2
17,8
36A
djus
tmen
t aris
ing
from
cha
nges
in p
erce
ntag
e of
ow
ners
hip
in
equi
ty m
etho
d in
vest
ees
-
-
115,
418
-
-
-
-
-
-
115,
418
Tran
slat
ion
adju
stm
ents
-
- -
--
--
(2,2
47,8
25)
-(2
,247
,825
)Is
suan
ce o
f sto
ck fr
om e
xerc
isin
g em
ploy
ee st
ock
optio
ns
7,27
2
72
,722
18
7,81
1-
--
-
-
-26
0,53
3V
alua
tion
gain
on
avai
labl
e-fo
r-sa
le fi
nanc
ial a
sset
s
-
- -
--
--
- 14
,014
14,0
14N
et c
hang
e in
shar
ehol
ders
’ equ
ity fr
om e
quity
met
hod
inve
stee
s
-
- -
--
--
- 72
6,94
972
6,94
9
B
ALA
NC
E, D
ECEM
BER
31,
200
9
25
,902
,706
25
9,02
7,06
6 55
,486
,010
77,3
17,7
10-
104,
564,
972
181,
882,
682
(1,7
66,6
67)
453,
621
495,
082,
712
App
ropr
iatio
ns o
f prio
r yea
r’s e
arni
ngs
Le
gal c
apita
l res
erve
-
- -
8,92
1,78
4-
(8,9
21,7
84)
-
-
--
Spec
ial c
apita
l res
erve
-
- -
-1,
313,
047
(1,3
13,0
47)
-
-
--
Cas
h di
vide
nds t
o sh
areh
olde
rs -
NT$
3.00
per
shar
e
-
- -
--
(77,
708,
120)
(77,
708,
120)
-
-(7
7,70
8,12
0)N
et in
com
e in
201
0
-
- -
--
161,
605,
009
161,
605,
009
- -
161,
605,
009
Adj
ustm
ent a
risin
g fr
om c
hang
es in
per
cent
age
of o
wne
rshi
p in
eq
uity
met
hod
inve
stee
s
-
-
(1
7,88
5)
-
-
-
-
-
-
(1
7,88
5)Tr
ansl
atio
n ad
just
men
ts
-
-
--
--
-
(4
,776
,496
) -
(4,7
76,4
96)
Issu
ance
of s
tock
from
exe
rcis
ing
empl
oyee
stoc
k op
tions
7,
372
73,7
21
171,
103
--
--
- -
244,
824
Val
uatio
n lo
ss o
n av
aila
ble-
for-
sale
fina
ncia
l ass
ets
-
-
--
--
-
-
(441
,978
)(4
41,9
78)
Net
cha
nge
in sh
areh
olde
rs’ e
quity
from
equ
ity m
etho
d in
vest
ees
-
-
59,2
06-
--
-
-
97,6
4615
6,85
2
B
ALA
NC
E, D
ECEM
BER
31,
201
0
25
,910
,078
$ 2
59,1
00,7
87
$55
,698
,434
$86
,239
,494
$1,
313,
047
$17
8,22
7,03
0$
265,
779,
571
$
(6
,543
,163
) $
109,
289
$57
4,14
4,91
8 Th
e ac
com
pany
ing
note
s are
an
inte
gral
par
t of t
he fi
nanc
ial s
tate
men
ts.
(With
Del
oitte
& T
ouch
e au
dit r
epor
t dat
ed Ja
nuar
y 24
, 201
1)
- 16 -
Taiwan Semiconductor Manufacturing Company Limited STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars) 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 161,605,009 $ 89,217,836Adjustments to reconcile net income to net cash provided by operating
activities: Depreciation and amortization 83,366,121 74,327,868Unrealized gross profit from affiliates 52,742 160,279Amortization of premium/discount of financial assets 18,611 6,322Gain on disposal of available-for-sale financial assets, net - (37,370)Gain on held-to-maturity financial assets redeemed by the issuer - (16,091)Loss on disposal of financial assets carried at cost 1,263 97Equity in losses (earnings) of equity method investees, net (7,111,443) 2,695,720Cash dividends received from equity method investees 422,490 1,402,592Loss (gain) on disposal of property, plant and equipment and other
assets, net 761,298 (138,613)Settlement income from receiving equity securities (4,434,364) -Deferred income tax (373,253) (1,678,381)Changes in operating assets and liabilities:
Decrease (increase) in: Financial assets and liabilities at fair value through profit or
loss 189,577 (222,901)Receivables from related parties (3,192,201) (10,813,569)Notes and accounts receivable (2,366,385) (8,443,344)Allowance for doubtful receivables 57,000 (5,746)Allowance for sales returns and others (1,242,188) 2,715,050Other receivables from related parties 85,830 235,470Other financial assets 904,157 (392,317)Inventories (6,816,132) (6,022,280)Prepaid expenses and other current assets (445,797) 290,470
Increase (decrease) in: Accounts payable 624,608 4,925,758Payables to related parties 535,108 836,992Income tax payable (1,652,251) (461,691)Salary and bonus payable (3,389,548) 7,075,402Accrued profit sharing to employees and bonus to directors 4,188,131 (881,731)Accrued expenses and other current liabilities 265,241 1,259,544Accrued pension cost 17,425 97,167Deferred credits (47,873) (230,487)
Net cash provided by operating activities 222,023,176 155,902,046
(Continued)
- 17 -
Taiwan Semiconductor Manufacturing Company Limited STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars) 2010 2009 CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of: Property, plant and equipment $(182,335,032) $ (86,970,843)Held-to-maturity financial assets - (10,803,805)Investments accounted for using equity method (8,262,519) (320,443)Financial assets carried at cost (480) (1,411)
Proceeds from disposal or redemption of: Available-for-sale financial assets - 1,037,370Held-to-maturity financial assets 15,943,000 6,293,000Financial assets carried at cost 3,370 18,828Property, plant and equipment and other assets 387,735 71,850
Proceeds from return of capital by investees - 27,753Increase in deferred charges (1,538,301) (1,347,228)Decrease (increase) in refundable deposits (5,940,633) 21,621
Increase in other assets (1,004,581) -
Net cash used in investing activities (182,747,441) (91,973,308) CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans 30,908,637 -Repayment of bonds payable - (8,000,000)Decrease in guarantee deposits (253,489) (477,776)Proceeds from exercise of employee stock options 244,824 260,533Cash dividends (77,708,120) (76,876,312)
Net cash used in financing activities (46,808,148) (85,093,555)
NET DECREASE IN CASH AND CASH EQUIVALENTS (7,532,413) (21,164,817) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 117,043,543 138,208,360 CASH AND CASH EQUIVALENTS, END OF YEAR $ 109,511,130 $ 117,043,543 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 200,892 $ 351,803Income tax paid $ 9,640,396 $ 7,791,196
INVESTING ACTIVITIES AFFECTING BOTH CASH AND
NON-CASH ITEMS Acquisition of property, plant and equipment $ 195,950,918 $ 108,592,471Increase in payables to contractors and equipment suppliers (13,491,140) (21,620,819)Nonmonetary exchange trade-out price (124,746) (809)Cash paid $ 182,335,032 $ 86,970,843
(Continued)
- 18 -
Taiwan Semiconductor Manufacturing Company Limited STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars) 2010 2009
Disposal of property, plant and equipment and other assets $ 1,872,880 $ 64,390Decrease (increase) in other receivables from related parties (1,142,108) 8,269Increase in other financial assets (218,291) -Nonmonetary exchange trade-out price (124,746) (809)Cash received $ 387,735 $ 71,850
NON-CASH FINANCING ACTIVITIES
Current portion of other long-term payables (under accrued expenses and other current liabilities) $ 718,637 $ 769,144
The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated January 24, 2011) (Concluded)
- 19 -
INDEPENDENT AUDITORS’ REPORT The Board of Directors and Shareholders Taiwan Semiconductor Manufacturing Company Limited We have audited the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of December 31, 2010 and 2009, and the results of their consolidated operations and their consolidated cash flows for the years then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China. As discussed in Note 3 to the consolidated financial statements, effective January 1, 2009, Taiwan Semiconductor Manufacturing Company Limited and subsidiaries adopted the newly revised Statement of Financial Accounting Standards No. 10, “Accounting for Inventories.” January 24, 2011
Notice to Readers The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdiction. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China. For the convenience of readers, the auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and consolidated financial statements shall prevail.
ATTACHMENT IV
- 20 -
Tai
wan
Sem
icon
duct
or M
anuf
actu
ring
Com
pany
Lim
ited
and
Subs
idia
ries
C
ON
SOL
IDA
TE
D B
AL
AN
CE
SH
EE
TS
DE
CE
MB
ER
31,
201
0 A
ND
200
9 (I
n T
hous
ands
of N
ew T
aiw
an D
olla
rs, E
xcep
t Par
Val
ue)
2010
2009
2010
20
09
ASS
ET
S
Am
ount
%
A
mou
nt%
LIA
BIL
ITIE
S A
ND
SH
AR
EH
OL
DE
RS’
EQ
UIT
Y
A
mou
nt
%
Am
ount
%
CU
RR
ENT
ASS
ETS
CU
RR
ENT
LIA
BIL
ITIE
S
Cas
h an
d ca
sh e
quiv
alen
ts (N
otes
2 a
nd 4
)
$
14
7,88
6,95
5
20
$
171,
276,
341
29
Shor
t-ter
m lo
ans (
Not
e 15
)
$
31
,213
,944
4
$
-
-Fi
nanc
ial a
sset
s at f
air v
alue
thro
ugh
prof
it or
loss
(Not
es 2
, 5 a
nd 2
5)
6,
886
-
18
6,08
1
-
Fi
nanc
ial l
iabi
litie
s at f
air v
alue
thro
ugh
prof
it or
loss
(Not
es 2
, 5 a
nd 2
5)
19
,002
-
25
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets (
Not
es 2
, 6 a
nd 2
5)
28
,883
,728
4
14,3
89,9
46
2
Hed
ging
der
ivat
ive
finan
cial
liab
ilitie
s (N
otes
2, 1
1 an
d 25
)
814
-
-
-H
eld-
to-m
atur
ity fi
nanc
ial a
sset
s (N
otes
2, 7
and
25)
4,79
6,58
9
1
9,94
4,84
3
2
A
ccou
nts p
ayab
le
12
,104
,173
2
10,9
05,8
84
2R
ecei
vabl
es fr
om re
late
d pa
rties
2,72
2
-
12,5
24
-
Paya
bles
to re
late
d pa
rties
(Not
e 26
)
867,
085
-
78
3,00
7
-
Not
es a
nd a
ccou
nts r
ecei
vabl
e
51,0
29,8
85
7
44
,637
,642
7
In
com
e ta
x pa
yabl
e (N
otes
2 a
nd 2
0)
7,
184,
697
1
8,
800,
249
1A
llow
ance
for d
oubt
ful r
ecei
vabl
es (N
otes
2 a
nd 8
)
(504
,029
)
-
(543
,325
)
-
Sa
lary
and
bon
us p
ayab
le
6,
424,
064
1
9,
317,
035
2A
llow
ance
for s
ales
retu
rns a
nd o
ther
s (N
otes
2 a
nd 8
)
(7,5
46,2
64 )
(1
)
(8,7
24,4
81 )
(1 )
A
ccru
ed p
rofit
shar
ing
to e
mpl
oyee
s and
bon
us to
dire
ctor
s and
supe
rvis
ors
Oth
er re
ceiv
able
s fro
m re
late
d pa
rties
(Not
e 26
)
124,
586
-
12
1,29
2
-
(Not
es 2
and
22)
11,0
96,1
47
2
6,
818,
343
1O
ther
fina
ncia
l ass
ets (
Not
e 27
)
1,02
1,55
2
-
1,84
9,98
7
-
Pa
yabl
es to
con
tract
ors a
nd e
quip
men
t sup
plie
rs
43
,259
,857
6
28,9
24,2
65
5In
vent
orie
s (N
otes
2, 3
and
9)
28
,405
,984
4
20,9
13,7
51
4
Acc
rued
exp
ense
s and
oth
er c
urre
nt li
abili
ties (
Not
es 1
8, 2
5 an
d 29
)
10,7
79,9
23
1
12
,635
,182
2
Def
erre
d in
com
e ta
x as
sets
(Not
es 2
and
20)
5,37
3,07
6
1
4,37
0,30
9
1
C
urre
nt p
ortio
n of
long
-term
ban
k lo
ans (
Not
es 1
7, 2
5 an
d 27
)
241,
407
-
94
9,29
8
-
Prep
aid
expe
nses
and
oth
er c
urre
nt a
sset
s
2,
037,
647
-
1,
368,
838
-
To
tal c
urre
nt li
abili
ties
12
3,19
1,11
3
17
79,1
33,2
88
13To
tal c
urre
nt a
sset
s
261,
519,
317
36
259,
803,
748
44
LO
NG
-TER
M L
IAB
ILIT
IES
LO
NG
-TER
M IN
VES
TMEN
TS (N
otes
2, 6
, 7, 1
0, 1
2 an
d 25
)
B
onds
pay
able
(Not
es 1
6 an
d 25
)
4,50
0,00
0
1
4,50
0,00
0
1
Inve
stm
ents
acc
ount
ed fo
r usi
ng e
quity
met
hod
25
,815
,385
4
17,8
71,2
08
3
Long
-term
ban
k lo
ans (
Not
es 1
7, 2
5 an
d 27
)
301,
561
-
57
8,56
0
-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s
1,03
3,04
9
-
1,35
8,04
9
-
O
ther
long
-term
pay
able
s (N
otes
18,
25
and
29)
6,
554,
208
1
5,
602,
420
1H
eld-
to-m
atur
ity fi
nanc
ial a
sset
s
8,50
2,88
7
1
15,5
53,2
42
3
Obl
igat
ions
und
er c
apita
l lea
ses (
Not
es 2
, 13
and
25)
69
4,98
6
-
707,
499
-Fi
nanc
ial a
sset
s car
ried
at c
ost
4,
424,
207
1
3,
063,
004
1
To
tal l
ong-
term
liab
ilitie
s
12,0
50,7
55
2
11
,388
,479
2
Tota
l lon
g-te
rm in
vest
men
ts
39
,775
,528
6
37,8
45,5
03
7
O
THER
LIA
BIL
ITIE
S
PRO
PER
TY, P
LAN
T A
ND
EQ
UIP
MEN
T (N
otes
2, 1
3, 2
6 an
d 27
)
A
ccru
ed p
ensi
on c
ost (
Not
es 2
and
19)
3,81
2,35
1
1
3,79
7,03
2
1
Cos
t
G
uara
ntee
dep
osits
(Not
e 29
)
789,
098
-
1,
006,
023
-La
nd a
nd la
nd im
prov
emen
ts
89
1,19
7
-
934,
090
-
Def
erre
d cr
edits
126,
539
-
18
5,68
9
-
Bui
ldin
gs
14
5,96
6,02
4
20
14
2,29
4,55
8
24
O
ther
s
254,
643
-
13
7,16
1
-
Mac
hine
ry a
nd e
quip
men
t
913,
155,
252
12
7
775,
653,
489
130
O
ffic
e eq
uipm
ent
14
,856
,582
2
13,6
67,7
47
2
Tota
l oth
er li
abili
ties
4,
982,
631
1
5,
125,
905
1Le
ased
ass
ets
701,
552
-
71
4,42
4
-
1,
075,
570,
607
14
9
933,
264,
308
156
To
tal l
iabi
litie
s
140,
224,
499
20
95
,647
,672
16
Acc
umul
ated
dep
reci
atio
n
(773
,278
,157
)
(
107 )
(693
,743
,886
)
(11
7 )
Adv
ance
pay
men
ts a
nd c
onst
ruct
ion
in p
rogr
ess
86
,151
,573
12
34
,154
,365
6
EQ
UIT
Y A
TTR
IBU
TAB
LE T
O S
HA
REH
OLD
ERS
OF
THE
PAR
ENT
C
apita
l sto
ck -
NT$
10 p
ar v
alue
(Not
e 22
)
Net
pro
perty
, pla
nt a
nd e
quip
men
t
388,
444,
023
54
273,
674,
787
45
Aut
horiz
ed:
28,0
50,0
00 th
ousa
nd sh
ares
Is
sued
: 2
5,91
0,07
8 th
ousa
nd sh
ares
in 2
010
INTA
NG
IBLE
ASS
ETS
25
,902
,706
thou
sand
shar
es in
200
9
25
9,10
0,78
7
36
259,
027,
066
43G
oodw
ill (N
ote
2)
5,
704,
897
1
5,
931,
318
1
Cap
ital s
urpl
us (N
otes
2 a
nd 2
2)
55
,698
,434
8
55,4
86,0
10
9D
efer
red
char
ges,
net (
Not
es 2
and
14)
6,02
7,08
5
1
6,45
8,55
4
1
R
etai
ned
earn
ings
(Not
e 22
)
A
ppro
pria
ted
as le
gal c
apita
l res
erve
86,2
39,4
94
12
77
,317
,710
13
Tota
l int
angi
ble
asse
ts
11
,731
,982
2
12,3
89,8
72
2
App
ropr
iate
d as
spec
ial c
apita
l res
erve
1,31
3,04
7
-
-
-
U
napp
ropr
iate
d ea
rnin
gs
17
8,22
7,03
0
24
104,
564,
972
18O
THER
ASS
ETS
265,
779,
571
36
18
1,88
2,68
2
31
Def
erre
d in
com
e ta
x as
sets
(Not
es 2
and
20)
7,36
2,78
4
1
7,98
8,30
3
1
O
ther
s (N
otes
2, 1
1 an
d 25
)
Ref
unda
ble
depo
sits
8,67
7,97
0
1
2,73
3,14
3
1
C
umul
ativ
e tra
nsla
tion
adju
stm
ents
(6,5
43,1
63 )
(1 )
(1,7
66,6
67 )
-O
ther
s (N
otes
2 a
nd 2
7)
1,
417,
300
-
26
0,86
4
-
U
nrea
lized
gai
n on
fina
ncia
l ins
trum
ents
109,
289
-
45
3,62
1
-
(6
,433
,874
)
(1
)
(1
,313
,046
)
-
Tota
l oth
er a
sset
s
17,4
58,0
54
2
10
,982
,310
2
Equi
ty a
ttrib
utab
le to
shar
ehol
ders
of t
he p
aren
t
574,
144,
918
79
49
5,08
2,71
2
83
MIN
OR
ITY
INTE
RES
TS (N
ote
2)
4,
559,
487
1
3,
965,
836
1
To
tal s
hare
hold
ers’
equ
ity
57
8,70
4,40
5
80
499,
048,
548
84
TOTA
L
$
718,
928,
904
10
0
$
59
4,69
6,22
0
10
0
TOTA
L
$
718,
928,
904
100
$
59
4,69
6,22
0
10
0 Th
e ac
com
pany
ing
note
s are
an
inte
gral
par
t of t
he c
onso
lidat
ed fi
nanc
ial s
tate
men
ts.
(With
Del
oitte
& T
ouch
e au
dit r
epor
t dat
ed Ja
nuar
y 24
, 201
1)
- 21 -
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2010 2009 Amount % Amount % GROSS SALES (Notes 2 and 26) $ 431,630,858 $ 309,655,614 SALES RETURNS AND ALLOWANCES (Notes 2
and 8) 12,092,947 13,913,375 NET SALES 419,537,911 100 295,742,239 100 COST OF SALES (Notes 3, 9, 21 and 26) 212,484,320 51 166,413,628 56 GROSS PROFIT 207,053,591 49 129,328,611 44 OPERATING EXPENSES (Notes 21 and 26)
Research and development 29,706,662 7 21,593,398 7General and administrative 12,803,997 3 11,285,478 4Marketing 5,367,597 1 4,487,849 2
Total operating expenses 47,878,256 11 37,366,725 13
INCOME FROM OPERATIONS 159,175,335 38 91,961,886 31 NON-OPERATING INCOME AND GAINS
Settlement income (Note 29) 6,939,764 2 1,464,915 1Equity in earnings of equity method investees, net
(Notes 2 and 10) 2,298,159 1 45,994 -Interest income 1,665,193 - 2,600,925 1Gain on settlement and disposal of financial assets,
net (Notes 2 and 25) 736,843 - 15,999 -Technical service income (Notes 26 and 29) 450,503 - 367,013 -Valuation gain on financial instruments, net (Notes 2, 5 and 25) 320,730 - 594,660 -Others (Notes 2 and 26) 724,880 - 564,042 -
Total non-operating income and gains 13,136,072 3 5,653,548 2
(Continued)
- 22 -
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2010 2009 Amount % Amount % NON-OPERATING EXPENSES AND LOSSES
Loss on disposal of property, plant and equipment(Note 2) $ 849,254 - $ - -
Interest expense 425,356 - 391,479 -Casualty loss (Note 9) 190,992 - - -Impairment of financial assets (Notes 2, 6, 12 and 25) 159,798 - 913,230 1Foreign exchange loss, net (Note 2) 99,130 - 626,971 -Others (Note 2) 316,482 - 221,107 -
Total non-operating expenses and losses 2,041,012 - 2,152,787 1
INCOME BEFORE INCOME TAX 170,270,395 41 95,462,647 32 INCOME TAX EXPENSE (Notes 2 and 20) 7,988,465 2 5,996,424 2 NET INCOME $ 162,281,930 39 $ 89,466,223 30 ATTRIBUTABLE TO:
Shareholders of the parent $ 161,605,009 39 $ 89,217,836 30Minority interests 676,921 - 248,387 -
$ 162,281,930 39 $ 89,466,223 30 2010 2009
Income Attributable to
Shareholders of the ParentIncome Attributable to
Shareholders of the Parent
Before
Income TaxAfter
Income TaxBefore
Income Tax After
Income Tax EARNINGS PER SHARE (NT$, Note 24)
Basic earnings per share $ 6.54 $ 6.24 $ 3.68 $ 3.45 Diluted earnings per share $ 6.54 $ 6.23 $ 3.67 $ 3.44
The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche audit report dated January 24, 2011) (Concluded)
- 23 -
Tai
wan
Sem
icon
duct
or M
anuf
actu
ring
Com
pany
Lim
ited
and
Subs
idia
ries
C
ON
SOL
IDA
TE
D S
TA
TE
ME
NT
S O
F C
HA
NG
ES
IN S
HA
RE
HO
LD
ER
S’ E
QU
ITY
FO
R T
HE
YE
AR
S E
ND
ED
DE
CE
MB
ER
31,
201
0 A
ND
200
9 (I
n T
hous
ands
of N
ew T
aiw
an D
olla
rs, E
xcep
t Div
iden
ds P
er S
hare
)
E
quity
Att
ribu
tabl
e to
Sha
reho
lder
s of t
he P
aren
t
O
ther
s
Unr
ealiz
ed
Cap
ital S
tock
- C
omm
on S
tock
Ret
aine
d E
arni
ngs
Cum
ulat
ive
G
ain
(Los
s)
T
otal
Sh
ares
Leg
al C
apita
lSp
ecia
l Cap
ital
Una
ppro
pria
ted
T
rans
latio
n
on F
inan
cial
M
inor
ity
Shar
ehol
ders
’
(I
n T
hous
ands
)
Am
ount
C
apita
l Sur
plus
Res
erve
R
eser
ve
Ear
ning
s T
otal
A
djus
tmen
ts
In
stru
men
ts
T
otal
In
tere
sts
Equ
ity
BA
LAN
CE,
JAN
UA
RY
1, 2
009
25
,625
,437
$ 2
56,2
54,3
73
$
49,8
75,2
55 $
67
,324
,393
$
391,
857
$ 1
02,3
37,4
17 $
170
,053
,667
$
481,
158
$
(2
87,3
42 )
$
476
,377
,111
$
3,99
5,35
6 $
480
,372
,467
App
ropr
iatio
ns o
f prio
r yea
r’s e
arni
ngs
Le
gal c
apita
l res
erve
-
-
-
9,
993,
317
-
(9
,993
,317
)
-
-
-
-
-
-R
ever
sal o
f spe
cial
cap
ital r
eser
ve
-
-
-
-
(391
,857
)
391,
857
-
-
-
-
-
-
Cas
h di
vide
nds t
o sh
areh
olde
rs -
NT$
3.00
per
shar
e
-
-
-
-
-
(7
6,87
6,31
2 )
(76,
876,
312 )
-
-
(7
6,87
6,31
2 )
-
(76,
876,
312 )
Stoc
k di
vide
nds t
o sh
areh
olde
rs -
NT$
0.02
per
shar
e
51,2
51
512,
509
-
-
-
(5
12,5
09 )
(5
12,5
09 )
-
-
-
-
-
Prof
it sh
arin
g to
em
ploy
ees -
in st
ock
14
1,87
0
1,
418,
699
6,
076,
289
-
-
-
-
-
-
7,
494,
988
-
7,
494,
988
Cap
ital s
urpl
us tr
ansf
erre
d to
cap
ital s
tock
76,8
76
768,
763
(7
68,7
63 )
-
-
-
-
-
-
-
-
-
Net
inco
me
in 2
009
-
-
-
-
-
89,2
17,8
36
89,2
17,8
36
-
-
89,2
17,8
36
248,
387
89
,466
,223
Adj
ustm
ent a
risin
g fr
om c
hang
es in
per
cent
age
of o
wne
rshi
p in
equ
ity m
etho
d in
vest
ees
-
-
115,
418
-
-
-
-
-
-
11
5,41
8
(38,
966 )
76
,452
Tran
slat
ion
adju
stm
ents
-
-
-
-
-
-
-
(2
,247
,825
)
-
(2,2
47,8
25 )
39
,786
(2
,208
,039
)Is
suan
ce o
f sto
ck fr
om e
xerc
isin
g em
ploy
ee st
ock
optio
ns
7,
272
72,7
22
18
7,81
1
-
-
-
-
-
-
260,
533
-
26
0,53
3V
alua
tion
gain
on
avai
labl
e-fo
r-sa
le fi
nanc
ial a
sset
s
-
-
-
-
-
-
-
-
622,
541
622,
541
6,
047
62
8,58
8N
et c
hang
e in
shar
ehol
ders
’ equ
ity fr
om e
quity
met
hod
inve
stee
s
-
-
-
-
-
-
-
-
118,
422
118,
422
-
11
8,42
2D
ecre
ase
in m
inor
ity in
tere
sts
-
-
-
-
-
-
-
-
-
-
(284
,774
)
(284
,774
)
B
ALA
NC
E, D
ECEM
BER
31,
200
9
25,9
02,7
06
259,
027,
066
55
,486
,010
77
,317
,710
-
10
4,56
4,97
2
181,
882,
682
(1
,766
,667
)
45
3,62
1
49
5,08
2,71
2
3,96
5,83
6
499,
048,
548
App
ropr
iatio
ns o
f prio
r yea
r’s e
arni
ngs
Lega
l cap
ital r
eser
ve
-
-
-
8,92
1,78
4
-
(8,9
21,7
84 )
-
-
-
-
-
-
Spec
ial c
apita
l res
erve
-
-
-
-
1,
313,
047
(1
,313
,047
)
-
-
-
-
-
-C
ash
divi
dend
s to
shar
ehol
ders
- N
T$3.
00 p
er sh
are
-
-
-
-
-
(77,
708,
120 )
(7
7,70
8,12
0 )
-
-
(77,
708,
120 )
-
(7
7,70
8,12
0 )N
et in
com
e in
201
0
-
-
-
-
-
16
1,60
5,00
9
161,
605,
009
-
-
16
1,60
5,00
9
676,
921
16
2,28
1,93
0A
djus
tmen
t aris
ing
from
cha
nges
in p
erce
ntag
e of
ow
ners
hip
in e
quity
met
hod
inve
stee
s
-
-
(1
7,88
5 )
-
-
-
-
-
-
(17,
885 )
4,
387
(1
3,49
8 )Tr
ansl
atio
n ad
just
men
ts
-
-
-
-
-
-
-
(4,7
76,4
96 )
-
(4
,776
,496
)
7,25
8
(4,7
69,2
38 )
Issu
ance
of s
tock
from
exe
rcis
ing
empl
oyee
stoc
k op
tions
7,37
2
73
,721
171,
103
-
-
-
-
-
-
24
4,82
4
-
244,
824
Val
uatio
n ga
in (l
oss)
on
avai
labl
e-fo
r-sa
le fi
nanc
ial a
sset
s
-
-
-
-
-
-
-
-
(337
,970
)
(3
37,9
70 )
3,
949
(3
34,0
21 )
Net
cha
nge
in sh
areh
olde
rs’ e
quity
from
equ
ity m
etho
d in
vest
ees
-
-
59,2
06
-
-
-
-
-
(6
,031
)
53
,175
31
,702
84
,877
Net
cha
nge
in u
nrea
lized
loss
on
hedg
ing
deriv
ativ
e fin
anci
al in
stru
men
ts
-
-
-
-
-
-
-
-
(3
31 )
(331
)
(483
)
(814
)D
ecre
ase
in m
inor
ity in
tere
sts
-
-
-
-
-
-
-
-
-
-
(130
,083
)
(130
,083
)
B
ALA
NC
E, D
ECEM
BER
31,
201
0
25,9
10,0
78
$
259
,100
,787
$
55
,698
,434
$
86,2
39,4
94 $
1,
313,
047
$ 1
78,2
27,0
30 $
265
,779
,571
$
(6,5
43,1
63 )
$
10
9,28
9
$ 5
74,1
44,9
18 $
4,
559,
487
$ 5
78,7
04,4
05 Th
e ac
com
pany
ing
note
s are
an
inte
gral
par
t of t
he c
onso
lidat
ed fi
nanc
ial s
tate
men
ts.
(With
Del
oitte
& T
ouch
e au
dit r
epor
t dat
ed Ja
nuar
y 24
, 201
1)
- 24 -
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars) 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES
Net income attributable to shareholders of the parent $ 161,605,009 $ 89,217,836Net income attributable to minority interests 676,921 248,387Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 87,810,103 80,814,748Amortization of premium/discount of financial assets 34,142 21,483Impairment of financial assets 159,798 913,230Loss (gain) on disposal of available-for-sale financial assets, net (603,368) 20,337Gain on held-to-maturity financial assets redeemed by the issuer - (16,091)Gain on disposal of financial assets carried at cost, net (133,475) (20,245)Equity in earnings of equity method investees, net (2,298,159) (45,994)Cash dividends received from equity method investees 320,002 1,239,490Loss (gain) on disposal of property, plant and equipment and other
assets, net 633,230
(45,475)Settlement income from receiving equity securities (4,434,364) -Loss on idle assets 319 -Deferred income tax (377,248) (1,752,409)Changes in operating assets and liabilities:
Decrease (increase) in: Financial assets and liabilities at fair value through profit or
loss 198,172
(215,513)Receivables from related parties 9,802 (12,117)Notes and accounts receivable (6,392,243) (19,614,321)Allowance for doubtful receivables (39,296) 87,574Allowance for sales returns and others (1,178,217) 2,653,455Other receivables from related parties (3,294) (21,374)Other financial assets 740,959 7,834Inventories (7,492,233) (6,037,106)Prepaid expenses and other current assets (752,408) 585,430
Increase (decrease) in: Accounts payable 933,894 4,916,885Payables to related parties 84,078 293,150Income tax payable (1,615,552) (531,576)Salary and bonus payable (2,892,971) 7,101,255Accrued profit sharing to employees and bonus to directors and supervisors 4,277,804
(1,056,399)
Accrued expenses and other current liabilities 248,192 1,356,269Accrued pension cost 15,319 95,448Deferred credits (59,150) (237,726)
Net cash provided by operating activities 229,475,766 159,966,465
(Continued)
- 25 -
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars) 2010 2009 CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of: Property, plant and equipment $ (186,944,203) $ (87,784,906)Available-for-sale financial assets (48,340,334) (38,800,577)Held-to-maturity financial assets (4,101,501) (12,224,353)Investments accounted for using equity method (6,242,350) (42,947)Financial assets carried at cost (1,812,928) (321,195)
Proceeds from disposal or redemption of: Available-for-sale financial assets 37,816,288 36,039,978Held-to-maturity financial assets 15,943,000 7,944,800Financial assets carried at cost 242,335 131,075Property, plant and equipment and other assets 115,524 24,241
Increase in deferred charges (1,801,728) (1,469,831)Decrease (increase) in refundable deposits (5,944,827) 34,056Decrease (increase) in other assets (1,015,458) 1,176
Net cash used in investing activities (202,086,182) (96,468,483)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans 31,213,944 -Proceeds from long-term bank loans - 286,574Repayments of:
Long-term bank loans (967,034) (378,673)Bonds payable - (8,000,000)
Decrease in other long-term payables (1,107,333) -Decrease in guarantee deposits (232,925) (478,472)Proceeds from donation 49,021 -Proceeds from exercise of employee stock options 244,824 260,533Cash dividends (77,708,120) (76,876,312)Decrease in minority interests (130,083) (284,774)
Net cash used in financing activities (48,637,706) (85,471,124)
NET DECREASE IN CASH AND CASH EQUIVALENTS (21,248,122) (21,973,142) EFFECT OF EXCHANGE RATE CHANGES (2,141,264) (1,364,269) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 171,276,341 194,613,752 CASH AND CASH EQUIVALENTS, END OF YEAR $ 147,886,955 $ 171,276,341
(Continued)
- 26 -
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In Thousands of New Taiwan Dollars) 2010 2009 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 392,805 $ 580,376Income tax paid $ 9,818,418 $ 8,088,124
INVESTING ACTIVITIES AFFECTING BOTH CASH AND
NON-CASH ITEMS
Acquisition of property, plant and equipment $ 201,696,476 $ 109,151,226Increase in payables to contractors and equipment suppliers (14,599,987) (21,361,340)Nonmonetary exchange trade-out price (124,746) (809)Increase in other liabilities (27,540) -Increase in obligations under capital leases - (4,171)Cash paid $ 186,944,203 $ 87,784,906 Acquisition of available-for-sale financial assets $ 48,405,875 $ 38,800,577Increase in accrued expenses and other current liabilities (65,541) - Cash paid $ 48,340,334 $ 38,800,577 Disposal of property, plant and equipment and other assets $ 458,561 $ 25,050Increase in other financial assets (218,291) -Nonmonetary exchange trade-out price (124,746) (809)Cash received $ 115,524 $ 24,241
NON-CASH FINANCING ACTIVITIES Current portion of long-term bank loans $ 241,407 $ 949,298Current portion of other long-term payables (under accrued expenses
and other current liabilities) $ 1,406,601
$ 4,005,307 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche audit report dated January 24, 2011) (Concluded)
- 27 -
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED PROFIT ALLOCATION PROPOSAL
December 31, 2010 Unit: NT$
Net Income of 2010 (Note) 161,605,008,798 Subtract: - 10% Legal Reserve 16,160,500,880 - Special Reserve 5,120,827,612 Retained Earnings in 2010 Available for Distribution 140,323,680,306 Add: - Unappropriated Retained Earnings of Previous Years 16,622,021,999 Retained Earnings Available for Distribution as of December 31, 2010 156,945,702,305 Distribution Item: - Cash Dividends to Common Share Holders (NT$3.0 per share) 77,730,235,992 Unappropriated Retained Earnings 79,215,466,313 (Note) :
After expensing the following: ‧Employees' cash bonus and profit sharing of NT$21,816,676,188, including
- NT$10,908,338,094 distributed cash bonus; and - NT$10,908,338,094 cash profit sharing to be distributed after 2011 regular Shareholders' Meeting
‧Directors' bonus of NT$51,131,000
ATTACHMENT V
- 28 -
Comparison Table for the "Procedures for Lending Funds to Other Parties"
Before and After Revision
BEFORE THE REVISION AFTER THE REVISION Article 3 The total amount available for lending purpose shall not exceed twenty percent (20%) of the net worth of the Company. The total amount for lending to a company having business relationship with the Company shall not exceed the total transaction amount between the parties during the period of twelve (12) months prior to the time of lending (For the purpose of this Procedure, the "transaction amount" shall mean the sales or purchasing amount between the parties, whichever is higher), and shall not exceed ten percent (10%) of the net worth of the Company. The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of the Company. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower's net worth, provided that this restriction will not apply to subsidiaries whose voting shares are 100% owned, directly or indirectly, by the Company.
Article 3 The total amount available for lending purpose shall not exceed twenty percent (20%) of the net worth of the Company. The lending limits for any borrower are set forth below: 1. The total amount for lending to a
company having business relationship with the Company shall not exceed the total transaction amount between the parties during the period of twelve (12) months prior to the time of lending (For the purpose of this Procedure, the "transaction amount" shall mean the sales or purchasing amount between the parties, whichever is higher), and shall not exceed ten percent (10%) of the net worth of the Company.
2. The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of the Company.
In addition, tThe total amount lendableavailable to any one borrower shall be no more than thirty percent (30%) of the borrower's net worth, provided that this restriction will not apply to
ATTACHMENT VI
- 29 -
The total amount for fund-lending between the subsidiaries whose voting shares are 100% owned, directly or indirectly, by the Company will not be subject to the limit of twenty percent (20%) of the net worth of the lending subsidiary.
subsidiaries whose voting shares are 100%owned, directly or indirectly, by the Company. The total amount for fund-lendingWhen there is a lending for funding needs between theoffshore subsidiaries whose voting shares are 100% owned, directly or indirectly, by the Company, willthe total amount for such lending shall not be subject to the limit of twenty percent (20%) of the net worth of the lending subsidiary and the lending will not be subject to the restrictions under Article 4.
Article 9 Any lending of the Company's funds shall be evaluated with and subject to the "Guidelines for Fund-Lending and Providing Endorsements and Guarantees by Public Companies" announced by the securities regulatory authority and the Procedures, and then submitted, together with the result of the evaluation made as described in the second paragraph of Article 5, to the Board of Directors for its approval and no delegation shall be made to any person in this regard. However, material lending of funds shall be approved by the Audit Committee in accordance with relevant regulations and submitted to the Board of Directors for a resolution.
Article 9 Any lending of the Company's funds shall be evaluated with and subject to the "Guidelines for Fund-Lending and Providing Endorsements and Guarantees by Public Companies" announced by the securities regulatory authority and the Procedures, and then submitted, together with the result of the evaluation made as described in the second paragraph of Article 5, to the Board of Directors for its approval and no delegation shall be made to any person in this regard. However, material lending of funds shall be approved by the Audit Committee in accordance with relevant regulations and submitted to the Board of Directors for a resolution. Fund-lending between the Company and its subsidiaries, or among the subsidiaries, shall be approved by the board of directors
- 30 -
of the lending company, which board may authorize its chairman to lend funds to a specific borrowing counterparty, within a certain pre-approved monetary amount and within a period not exceeding one year, in one or several drawdowns or via a revolving credit line. However, the above authorized lending amount to be approved by the board shall not exceed 10% of the net worth as disclosed by the lending company's most recent audited financial statements.
- 31 -
Comparison Table for the
"Procedures for Endorsement & Guarantee" Before and After Revision
BEFORE THE REVISION AFTER THE REVISION Article 2 The party to whom the Company may provide endorsement and/or guarantee include the following: 1. Any company who has business
relationship with the Company. 2. Any subsidiary whose voting shares
are fifty percent (50%) or more owned directly by the Company.
3. Any company in which the Company
invests and whose voting shares are fifty percent (50%) or more owned collectively by the Company and its subsidiaries.
4. Any parent company who directly or through its subsidiaries indirectly own fifty percent (50%) or more of the Company's voting shares.
Subsidiaries whose voting shares are 100% owned, directly or indirectly, by the Company may provide endorsement and/or guarantee to each other.
Article 2 The party to whom the Company may provide endorsement and/or guarantee include the following: 1. Any company who has business
relationship with the Company. 2. Any subsidiary whose voting shares
are fifty percent (50%) or more owned, directly or indirectly, by the Company.
3. Any company in which the Company invests and whose voting shares are fifty percent (50%) or more owned collectively by the Company and its subsidiaries.
3.4. Any parent company who directly or through its subsidiaries indirectly own fifty percent (50%) or more of the Company's voting shares.
Subsidiaries whose voting shares are 100at least 90% owned, directly or indirectly, by the Company may provide endorsement and/or guarantee to each other., and the total amount of such endorsement/guarantee shall not exceed 10% of the Company's net worth. The limit restriction shall not apply to endorsement/guarantee when such subsidiaries' voting shares are 100% owned, directly or indirectly, by the Company.
Article 4 The amount of endorsement/guarantee provided by the Company is subject to the
Article 4 The total amount of endorsement/guarantee provided by the
ATTACHMENT VII
- 32 -
following limits: 1. The total amount of
endorsement/guarantee provided by the Company is limited to twenty-five percent (25%) of its net worth. For any one endorsee/guarantee company, the limit shall not exceed ten percent (10%) of the Company's net worth, nor the net worth of the endorsee/guarantee company, whichever is lower. Subject to the approval of the Board of Directors, the aforementioned limit for any one endorsee/guarantee company and the limit of total net worth of the endorsee/guarantee company may be lifted for endorsement/guarantee provided to the subsidiaries whose voting shares are one hundred percent (100%) directly or indirectly owned by the Company.
2. In case the above limits have to be
exceeded to accommodate business needs, the approval from the Audit Committee and a resolution of the Board of Directors should be obtained and over half of all the directors should jointly endorse the potential loss that may be brought about by the excess of limits. The Board of Directors should also revise the Procedures and has it ratified at the Shareholders' Meeting. If
Company or by the Company and its subsidiaries is subject to the following limits: 1. The total amount of
endorsement/guarantee provided by the Company is limited toshall not exceed twenty-five percent (25%) of itsthe Company's net worth.
2. For any one endorsee/guarantee company, tThe limittotal amount of the endorsement/guarantee provided by the Company to any individual entity shall not exceed ten percent (10%) of the Company's net worth, nor the net worth of the endorsee/guarantee companysuch entity, whichever is lower. Subject to the approval of the Board of Directors, the aforementioned 10% limit for any one endorsee/guarantee company and the limit of total net worth of the endorsee/guarantee companyfor any individual entity may be lifted for endorsement/guarantee provided toby the Company for the benefit of the subsidiaries whose voting shares are one hundred percent (100%) directly or indirectly owned by the Company.
The total endorsement/guarantee amount for the Company and its subsidiaries and the amount for any single entity should follow the paragraph set forth herein. 2. In case the above limits have to be
exceeded to accommodate business needs, the approval from the Audit Committee and a resolution of the Board of Directors should be obtained and over half of all the directors should jointly endorse the potential loss that may be brought about by the excess of limits. The Board of Directors should also revise the Procedures and has it ratified at the Shareholders' Meeting. If
- 33 -
the revised Procedures are not ratified at the Shareholders' Meeting, the Board of Directors should furnish a plan containing a timetable to withdraw the excess portion.
the revised Procedures are not ratified at the Shareholders' Meeting, the Board of Directors should furnish a plan containing a timetable to withdraw the excess portion.
The total amount of endorsement/guarantee provided by the Company to any individual entity deriving from business relations shall not exceed the total business amount between such party and the Company for the twelve-month period immediately before the extension of endorsement/guarantee (the business amount refers to purchase amount or sales amount of the goods between the parties, whichever is higher).
Article 6 The procedures and authority level for providing endorsement and/or guarantee are defined as follows: Any endorsement and/or guarantee to be provided by the Company shall be evaluated with the "Guidelines for Fund-Lending and Providing Endorsements and Guarantees by Public Companies" announced by the securities regulatory authority, and the Procedures. Finance Department shall then evaluate the necessity and rationality of the endorsement/guarantee, the credibility and risk of involved parties, the impact towards the Company's operating risk, financial position and shareholders' equity, and the necessity to acquire collateral and appraisal of collateral. Such evaluation results, along with comments and opinions provided by other related departments, shall be submitted to the Board of Directors for approval. A pre-determined limit may be delegated to the Chairman by the Board of Directors to facilitate execution and such endorsement/guarantee shall be reported to the most upcoming
Article 6 The procedures and authority level for providing endorsement and/or guarantee are defined as follows: Any endorsement and/or guarantee to be provided by the Company shall be evaluated with the "Guidelines for Fund-Lending and Providing Endorsements and Guarantees by Public Companies" announced by the securities regulatory authority, and the Procedures. Finance Department shall then evaluate the necessity and rationality of the endorsement/guarantee, the credibility and risk of involved parties, the impact towards the Company's operating risk, financial position and shareholders' equity, and the necessity to acquire collateral and appraisal of collateral. Such evaluation results, along with comments and opinions provided by other related departments, shall be submitted to the Board of Directors for approval. A pre-determined limit may be delegated to the Chairman by the Board of Directors to facilitate execution and such endorsement/guarantee shall be reported to the most upcoming
- 34 -
Board of Directors' Meeting for ratification. Material endorsements and/or guarantees shall be approved by the Audit Committee in accordance with relevant regulations and submitted to the Board of Directors for a resolution. For endorsement/guarantee deriving from business relations, the amount provided to any single party shall not exceed the total business amount between the party and theCompany over the twelve-month period before the extension of endorsement/guarantee (business amount refers to the higher one of goods sold and goods procured between the party and the Company). The Finance Department shall establish and maintain a reference book to record all endorsement/guarantee-related information in accordance with the relevant regulations. The Accounting Department shall follow the Generally Accepted Accounting Principles to assess and recognize, if any, contingent losses brought about by the endorsement/guarantee, to adequately disclose information in the financial statements, and to provide external auditors with necessary information for conducting due auditing and issuing auditing report.
Board of Directors' Meeting for ratification. Material endorsements and/or guarantees shall be approved by the Audit Committee in accordance with relevant regulations and submitted to the Board of Directors for a resolution. For endorsement/guarantee deriving from business relations, the amount provided to any single party shall not exceed the total business amount between the party and theCompany over the twelve-month period before the extension of endorsement/guarantee (business amount refers to the higher one of goods sold and goods procured between the party and the Company). In case the Company or its subsidiary desires to provide endorsement/guarantee for the benefit of a subsidiary whose net worth is lower than half of its paid-in capital, Finance and related Departments shall evaluate the relevant risks, establish risk control measures and exercise implementation review, as well as regularly report the same to the Audit Committee. The Finance Department shall establish and maintain a reference book to record all endorsement/guarantee-related information in accordance with the relevant regulations. The Accounting Department shall follow the Generally Accepted Accounting Principles to assess and recognize, if any, contingent losses brought about by the endorsement/guarantee, to adequately disclose information in the financial statements, and to provide external auditors with necessary information for conducting due auditing and issuing auditing report.
- 35 -
Article 10 When endorsement/guarantee extended to other parties is contemplated by the Company's subsidiary, the Company shall mandate the subsidiary to establish relevant procedures for endorsement/guarantee. Such procedures shall be approved by the Audit Committee and/or the Board of Directors and/or Shareholders' Meeting of the subsidiary, and become effective thereafter. Relevant information of the endorsement/guarantee extended by the Company's subsidiary should be provided regularly to the Company for inspection. The Company should also mandate the subsidiary to handle endorsement/guarantee in accordance with its procedures.
Article 10 When endorsement/guarantee extended to other parties is contemplated by the Company's subsidiary, the Company shall mandate the subsidiary to establish relevant procedures for endorsement/guarantee. Such procedures shall be approved by the Audit Committee and/or the Board of Directors and/or Shareholders' Meeting of the subsidiary, and become effective thereafter. Relevant information of the endorsement/guarantee extended by the Company's subsidiary should be provided regularly to the Company for inspection. The Company should also mandate the subsidiary to handle endorsement/guarantee in accordance with its procedures. The endorsement/guarantee made between the subsidiaries, whose voting shares are at least 90% owned, directly or indirectly, by the Company, shall be submitted to the Board of Directors for approval in advance, provided, however, this approval requirement shall not apply to endorsement/guarantee made between subsidiaries in which the Company holds, directly or indirectly, 100% of the voting shares.
- 36 -
Taiwan Semiconductor Manufacturing Company, Ltd.
Solar Business Transfer Plan (translation)
Taiwan Semiconductor Manufacturing Company, Ltd. (“TSMC”) intends to transfer its existing solar business (including assets, liabilities and operations) (“Solar Business” or the “Transferred Business”) to its wholly owned, newly incorporated subsidiary, TSMC Solar Ltd. (“TSMC Solar”), in exchange for the new shares to be issued by TSMC Solar to TSMC (the “Transfer”). Pursuant to the Business Merger and Acquisition Law (“BMAL”), the Company Act and other relevant laws and regulations, the plan for the Transfer (this “Transfer Plan”) is as set out below: Article 1: Transfer Method and Participating Companies The Transfer adopts the method of transferring the existing Solar Business to a newly incorporated company, i.e., TSMC transfers the relevant business (including assets, liabilities and operations) of its Solar Business to TSMC Solar, a company to be incorporated after the record date of the Transfer (“Transfer Record Date”), in consideration for TSMC Solar’s issuance of new shares to TSMC. The companies that will participate in the Transfer are as follows: Parent company: Taiwan Semiconductor Manufacturing Company, Ltd. Newly-incorporated company to assume the Transferred Business: TSMC Solar Ltd. Article 2: Articles of Incorporation of the Newly-Incorporated Company The Articles of Incorporation of TSMC Solar are as set out in Schedule 1. Article 3: Business Scope, Business Value, and Assets & Liabilities to be Transferred
by TSMC 1. Business Scope of the Transferred Business:
(1) TSMC’s Solar Business. (2) Factory(ies), machineries, equipment, inventory, bank deposits, long-term equity
investments, accounts receivable, accounts payable, and other relevant assets and liabilities (including tangible and intangible assets) required for TSMC’s Solar Business.
(3) Agreements (including, but not limited to, sales agreements, technology licensing
agreements, technical services agreements, supply agreements, lease agreements, loan agreements and other relevant agreements), legal actions, legal relationships, legal status, licenses, permits, rights and interests relevant to TSMC’s Solar Business. If the transfer of the aforementioned agreements, legal actions, legal relationships, legal status, licenses, permits and relevant rights and interests requires consent of the counter party or a third party in accordance with such
ATTACHMENT VIII
- 37 -
agreements or relevant laws or regulations, the transfer shall become effective only after consent of the counter party or third party is obtained.
(4) TSMC shall provide TSMC Solar the necessary rights under all technologies, software, know-how, trade secrets and other intellectual property rights owned by TSMC prior to the Transfer Record Date. TSMC and TSMC Solar shall cooperate with each other in carrying out the procedures to transfer relevant rights, transfer relevant technologies, and maintain relevant rights, and in providing relevant information, documentation, and programs, all in relation to the aforementioned intellectual property rights, such that the other party may exercise the relevant rights. The transfer of such intellectual property rights under this Paragraph shall not affect any rights licensed to others and the confidentiality obligations in existence prior to the Transfer.
(5) Other assets, liabilities, rights and obligations, interests, entitlement to tax
incentives that are unexpired or undeducted in relation to the Transferred Business, licenses, permits, and relevant legal relationships, factual relationships and status in relation to TSMC’s Solar Business.
2. Business Value of the Transferred Business and Relevant Adjustment on Shareholders’
Equity: The business value of the Transferred Business shall be calculated by deducting the liabilities of the Transferred Business from the assets of the Transferred Business, which is expected to be NT$11,897,382,000; further, after taking into account the adjustment on shareholders’ equity transferred along with the Transferred Business (i.e., NT$132,618,000), the business value of the Transferred Business shall turn out to be NT$12,030,000,000.
3. Assets of the Transferred Business: Assets to be transferred are as set out in Schedule 2,
the value of which is expected to be NT$12,227,973,000. 4. Liabilities of the Transferred Business: Liabilities to be transferred are as set out in
Schedule 2, the value of which is expected to be NT$330,591,000. 5. The aforementioned amounts of the business value, and assets and liabilities to be
transferred from TSMC are tentatively based on the book value in TSMC’s audited financial statements as of December 31, 2010, as well as taking into account the depreciations, the capital expenditure plan, and the forecasted changes in related accounts up until the Transfer Record Date. The actual amounts, however, shall still be based on the book value as at the Transfer Record Date.
6. In the event that it is necessary to adjust the aforementioned assets and liabilities to be
transferred, TSMC’s board of directors will be authorized by TSMC’s shareholders at a shareholders’ meeting to make adjustments. The same shall apply if it is necessary to adjust the business value of the Transferred Business and the number of shares to be issued by TSMC Solar.
Article 4: Number and Type of Shares to be Issued by TSMC Solar, and the
Number and Type of Shares to be Acquired by TSMC in exchange for the Transfer, and the Method of Calculation
1. Number of Shares to be Issued: The business value of the Transferred Business, which
- 38 -
is to be transferred from TSMC and to be assumed by TSMC Solar, is expected to be NT$12,030,000,000. TSMC Solar shall, based on the business value of the Transferred Business to be assumed by TSMC Solar, issue 1,203,000,000 common shares to TSMC at NT$10 per share, whereas TSMC will, in exchange for the Transfer, acquire a total of 1,203,000,000 common shares to be issued by TSMC Solar at NT$10 per share. Should there be any fractional shares which are less than 1 full share, TSMC Solar shall, based on the business value of the Transferred Business that is insufficient for exchanging 1 full share of TSMC Solar, pay TSMC in cash in a single installment within 30 days after TSMC Solar completes its corporate registration of incorporation.
2. Basis of calculation: The aforementioned number of shares to be issued by TSMC Solar
in consideration for the Transferred Business is determined in accordance with the book value of the assets and liabilities of the Transferred Business and the fairness opinion concerning the Transfer; details of the fairness opinion are as set out in Schedule 3.
3. TSMC Solar shall complete its corporate registration of incorporation and issue
common shares to TSMC after the Transfer Record Date in accordance with applicable laws and regulations. After completion of the Transfer, TSMC will directly hold 100% of the shares of TSMC Solar.
Article 5: Adjustment to the Business Value, Assets and Liabilities to be Transferred
by TSMC and the Number of Shares to be Issued by TSMC Solar in exchange therefor
In the event that any of the following circumstances is applicable to the value, assets and liabilities of the Transferred Business and the number of shares to be issued by TSMC Solar, TSMC’s board of directors will be authorized by TSMC’s shareholders at a shareholders’ meeting to make adjustments: 1. After this Transfer Plan is executed, TSMC acquires assets concerning Solar Business
and plans to add such assets to the scope of assets to be transferred; 2. The items or amounts of the assets or liabilities to be transferred vary due to TSMC’s
operations, investment or financing activities; 3. The items or amounts of the assets or liabilities to be transferred vary due to asset
revaluation, depreciation, amortization, addition or impairment; or 4. Other circumstances in which TSMC’s board of directors deems adjustments necessary,
or circumstances in which adjustments are necessary due to changes in laws and regulations or orders by competent authorities.
Article 6: Purchase and Cancellation of Shares held by Dissenting Shareholders In the event that any of TSMC’s shareholders expresses dissent to matters relating to the Transfer or this Transfer Plan, TSMC shall purchase the shares held by such dissenting shareholders according to applicable laws. The shares so purchased shall be disposed of or cancelled pursuant to applicable laws, and the corporate registration shall be amended accordingly.
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Article 7: Issuing Notices and Posting Public Announcement to Creditors 1. Once this Transfer Plan has been approved by TSMC’s shareholders meeting, TSMC
shall promptly prepare a balance sheet and a list of properties, and shall issue notices and make a public announcement to its creditors in respect of this Transfer Plan. Such notices and announcement shall stipulate a period of 30 days or more for creditors to raise objections. If a creditor raises an objection within the stipulated period, TSMC shall undertake relevant measures according to applicable laws and regulations.
2. If the debts repaid by TSMC to the objecting creditors in accordance with the preceding
paragraph are within the scope of this Transfer Plan, TSMC’s board of directors will be authorized to amend the business scope, business value, assets and liabilities of the Transfer stated in Article 3 above; the same applies where it is necessary to adjust the number and price of shares to be issued by TSMC Solar.
Article 8: Assumption of Rights and Obligations after the Transfer and the Related
Matters 1. All assets, liabilities and all rights and obligations that are effective and valid on the
Transfer Record Date shall, as of the Transfer Record Date, be transferred from TSMC and be fully assumed by TSMC Solar. TSMC shall cooperate in carrying out the relevant transfer procedures.
2. Unless the liabilities arising from the Transferred Business may be separated from
TSMC’s liabilities existing before the Transfer, TSMC Solar shall, within the scope of capital contribution in exchange for the Transferred Business, be held jointly and severally liable with TSMC for TSMC’s liabilities incurred prior to the Transfer, pursuant to Section 6, Article 32 of the BMAL. However, a creditor’s right to make claims shall be extinguished if not exercised within 2 years after the Transfer Record Date.
Article 9: Transfer and Retention of Employees In compliance with statutory procedures, TSMC and TSMC Solar shall negotiate the employees to be retained and employed by TSMC Solar, and inquire such employees of their intention to be retained. TSMC Solar shall acknowledge such retained employees’ seniorities in TSMC prior to the Transfer Record Date, or negotiate with such employees, to the extent permitted by relevant laws and regulations, other measures sufficient to protect employees’ rights and interests. Article 10: Transfer Record Date The Transfer Record Date, which is now scheduled on August 1, 2011 provided that, after this Transfer Plan is approved by TSMC’s shareholders at a shareholders’ meeting, in the event that it is necessary to adjust the Transfer Record Date so as to carry out legally required procedures or due to actual needs, TSMC’s board of directors will be authorized to make such adjustments. Article 11: Implementation of this Transfer Plan, Expected Completion Date and
Solutions for Delays
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1. This Transfer Plan will be adopted by TSMC’s shareholders’ meeting on June 9, 2011. 2. In the event that there is any delay or unfinished event of this Transfer Plan and its
expected implementation schedule, TSMC’s board of directors will be authorized, based on the actual circumstances and needs, to schedule the date of a shareholders’ meeting or a board meeting pursuant to relevant laws and regulations, and/or to take other actions as necessary.
Article 12: Allocation of Taxes and Expenses 1. Unless otherwise provided in this Transfer Plan, all taxes or expenses arising out of the
execution or performance of this Transfer Plan shall be borne by TSMC except where relevant tax exemptions or exclusions apply; however, if other laws and regulations provide otherwise, such laws and regulations shall prevail. In the event that this Transfer Plan fails to become effective, by virtue of failing to obtain the approval of TSMC’s shareholders or the competent authorities or any other reason, TSMC shall bear the attorneys’ and accountants’ fees and other related expenses already incurred.
2. TSMC and TSMC Solar shall cooperate in applying for any tax benefits and incentives
applicable to the Transfer. Article 13: Change of Paid-In capital of TSMC The paid-in capital of TSMC, unless otherwise decreased by cancellation of shares pursuant to Article 6 of this Transfer Plan or other laws and regulations, shall be maintained and shall not be decreased upon completion of the Transfer. Article 14: Governing Law 1. This Transfer Plan shall be implemented in accordance with the BMAL. In the event of
promulgation and enforcement of new laws that are more favorable to the Transfer, such laws that are more favorable may apply.
2. This Transfer Plan shall be governed and construed in accordance with the laws of ROC.
In the event of any dispute arising from this Transfer Plan, the Hsinchu District Court of Taiwan shall be the competent forum.
Article 15: Miscellaneous 1. If any provision of this Transfer Plan shall be held invalid due to any conflict with any
relevant laws and regulations, only the provision held invalid shall be invalidated, without affecting the validity of any other provisions. The provision which is held invalid due to conflict with relevant laws and regulations shall be modified as permitted by law, by TSMC’s board of directors based on authorization by TSMC’s shareholders.
2. If it is necessary to amend any provision of this Transfer Plan in response to any order
by the competent authorities, such provision shall be amended according to the decision of TSMC’s board of directors pursuant to the instruction of the competent authorities.
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3. This Transfer Plan shall only become valid and enforceable after it has been approved by the shareholders’ meeting of TSMC.
4. Any matters not provided under this Transfer Plan shall be governed by relevant laws
and regulations and rulings by the competent authorities. In the event of absence of relevant laws and regulations and rulings by the competent authorities, the board of directors of TSMC will be fully authorized by TSMC’s shareholders at a shareholders’ meeting to handle the relevant matters.
5. An English translation of this Transfer Plan is also prepared for reference; provided,
however, that the interpretation of this Transfer Plan shall be governed by the Chinese version.
6. The Schedules hereto shall constitute an integral part of this Transfer Plan. Taiwan Semiconductor Manufacturing Company, Ltd. Morris Chang Chairman & CEO DATE: April 27, 2011
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ARTICLES OF INCORPORATION
OF
TSMC SOLAR LTD.
Schedule 1
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Section I - General Provisions Article 1 The Corporation shall be incorporated, as a company limited by shares, under the Company Law of the Republic of China, and its name shall be 台積太陽能股份有限
公司 in the Chinese language, and TSMC Solar Ltd. in the English language. Article 2 The scope of business of the Corporation shall be as follows: 1. CC01080 Electronic Parts and Components Manufacturing 2. IG03010 Energy Technical Services 3. CC01090 Batteries Manufacturing Article 3 The Corporation shall have its head office in Science Based Industrial Park, Hsin Chu, Taiwan, Republic of China, and shall be free, upon approval of government authorities in charge, to set up representative and branch offices at various locations within and without the territory of the Republic of China, wherever and whenever the Corporation deems it necessary or advisable to carry out any or all of its activities. Article 4 Public announcements of the Corporation shall be made in accordance with the Company Law and other relevant rules and regulations. Article 5 The Corporation may provide endorsement and guarantee and act as a guarantor. Article 6 The total amount of the Corporation's reinvestment shall not be subject to the restriction of not more than forty percent of the Corporation's paid-up capital as provided in Article 13 of the Company Law. Any matters regarding the reinvestment shall be resolved in accordance with the resolutions of the Board of Directors.
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Section II - Capital Stock
Article 7 The total capital stock of the Corporation shall be in the amount of 13,500,000,000 New Taiwan Dollars, divided into 1,350,000,000 shares, at ten New Taiwan Dollars each, and may be paid-up in installments. Article 8 The Corporation shall print share certificates for shares issued in compliance with relevant provisions of the Company Law and relevant rules and regulations. The share certificates of the Corporation shall all be name-bearing share certificates, and issued in accordance with the Company Law and relevant rules and regulations. Article 9 All transfer of stocks, pledge of rights, loss, succession, gift, loss of seal, amendment of seal, change of address or similar stock transaction conducted by shareholders of the Corporation shall follow the relevant law and securities regulations. Article 10 Registration for transfer of shares shall be suspended thirty (30) days immediately before the date of regular meeting of shareholders, and fifteen (15) days immediately before the date of any special meeting of shareholders, or within five (5) days before the day on which dividend, bonus, or any other benefit is scheduled to be paid by the Corporation. Article 11 Shareholders' meetings of the Corporation are of two types, namely: (1) regular meetings and (2) special meetings. Regular meetings shall be convened, by the Board of Directors, within six (6) months after the close of each fiscal year. Special meetings shall be convened in accordance with the relevant laws, rules and regulations.
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Article 12 Written notices shall be sent to all shareholders at their latest places of residence as registered with the Corporation for the convening of shareholders' meetings, at least twenty (20) days in advance, in case of regular meetings; and at least ten (10) days in advance, in case of special meetings. The purpose(s) for convening any such meeting shall be clearly stated in the written notices sent out to the shareholders. Notices shall be written in Chinese, and English when necessary. Article 13 Except as provided in the Company Law, shareholders' meetings may be held if attended by shareholders in person or by proxy representing more than one half of the total issued and outstanding capital stock of the Corporation, and resolutions shall be adopted at the meeting with the concurrence of a majority of the votes held by shareholders present at the meeting. Article 14 Each share of stock shall be entitled to one vote. Article 15 If a shareholder is unable to attend a meeting, he/she may appoint a representative to attend it, and to exercise, on his/her behalf, all rights at the meeting, in accordance with Article 177 of the Company Law. A representative does not need to be a shareholder of the Corporation. Article 16 The shareholders' meeting shall be presided over by the Chairman of the Board of Directors of the Corporation. In his absence, one of the Directors shall preside in accordance with Article 208 of the Company Law. Article 17 The resolutions of the shareholders' meeting shall be recorded in the minutes, and such minutes shall be signed by or sealed with the chop of the chairman of the meeting. Such minutes, together with the attendance list and proxies, shall be filed and kept at
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the head office of the Corporation. Article 17-1 When there is only one corporate shareholder holding the Corporation, the functions and powers of the shareholders’ meeting shall be carried out by the board of the directors, and the provisions in respect of the shareholders’ meeting in these Articles of Incorporation shall not apply.
Section III – Directors and Supervisor(s) Article 18 The Corporation shall have three Directors and one Supervisor. Article 19 For the election of Directors, each share has the same voting rights equal to the numbers of Directors to be elected, and a shareholder may cast all his/her voting rights to one candidate or among several candidates; those candidates receiving more voting rights shall be elected as Directors. The same applies to the election of Supervisor(s). Article 19-1 When there is only one corporate shareholder holding the Corporation, Directors and Supervisor(s) shall be appointed by such corporate shareholder. Article 20 The term of office for Directors and Supervisor(s) shall be three (3) years, and all Directors and Supervisor(s) shall be eligible for re-election. Article 21 Except as otherwise provided in the Company Law, a meeting of the Board of Directors may be held if attended by a majority of total Directors and resolutions shall be adopted with the concurrence of the majority of the Directors present at the meeting.
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Article 22 The Directors shall elect from among themselves a Chairman of the Board of Directors by a majority in a meeting attended by over two-thirds of the Directors. The Chairman of the Board of Directors shall have the authority to represent the Corporation. Article 23 Except the first Board meeting of every term of the newly elected Board of Directors, which shall be convened by the Director who has received the largest number of votes after such new election, meetings of the Board of Directors shall be convened by the Chairman of the Board of Directors, upon written notice mailed to all the other Directors, at least seven (7) days, unless in case of urgent circumstances, prior to the date of the meeting, specifying the date and place of the meeting and its agenda. The meeting of the Board of Directors shall be held at least once every quarter. Such prescribed notices may be waived in writing by any Director, either before or after the meeting. The meetings of the Board of Directors may be convened, at any time, without such prescribed notice in case of urgent circumstances. Personal attendance at a meeting will represent a waiver of the notice. Any Director attending the meeting via video conference shall be deemed attending the meeting in person. Article 24 The Chairman of the Board of Directors shall preside over all meetings of the Board of Directors. In his absence, any one of the Directors shall be acting for him according to Article 208 of the Company Law. Article 25 A Director may, by written authorization, appoint another Director to attend on his behalf any meeting of the Board of Directors, and to vote for him on all matters presented at such meeting, but no Director may act as proxy for more than one other Director. Article 26 The Directors shall exercise their functions by resolutions adopted at meetings of Shareholders and the Board of Directors. Supervisor(s) may attend the meetings of the Board of Directors without voting rights, unless when performing duties in accordance
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with relevant laws and regulations. Article 27 In the case that vacancies on the Board of Directors exceed, for any reason, one third of the total number of the Directors, then the Board of Directors shall convene a shareholders' meeting to elect new Directors to fill such vacancies in accordance with relevant laws, rules and regulations. Except for the election of new Directors across the board, the new Directors shall serve the remaining term of the predecessors. In case all Supervisor(s) are discharged, the Board of Directors shall convene a shareholders’ meeting to elect new Supervisor(s) in accordance with relevant laws, rules and regulations. Article 28 The Board of Directors is authorized to determine the compensation for the Chairman, Directors and Supervisor(s), taking into account the extent and value of the services provided for the management of the Corporation and the standards of the industry within the R.O.C. and overseas.
Section IV - Management of the Corporation Article 29 The Chairman of the Board of Directors is also the Chief Executive Officer(s) of the Corporation. The Corporation may, by resolution of the Board of Directors, appoint one President and one or more Vice President(s). The aforementioned managers shall perform such duties as designated by the Chairman or the Board of Directors. Article 30 Subject to the provisions of the Company Law and these Articles of Incorporation, all actions of the Corporation's officers shall be in conformance with, and in furtherance of, the directions of the Board of Directors.
Section V - Financial Reports
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Article 31 The fiscal year for the Corporation shall be from January 1 of each year to December 31 of the same year. After the close of each fiscal year, the following reports shall be prepared by the Board of Directors, and submitted to the regular shareholders' meeting for acceptance:
1. Business Report;
2. Financial Statements;
3. Proposal Concerning Appropriation of Net Profits or Covering of Losses. Article 32 When allocating the net profits for each fiscal year, the Corporation shall first offset its losses in previous years and set aside a legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve has equaled the total capital of the Corporation; then set aside special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge; and then set aside not less than 1% as bonus to employees of this Corporation. This Corporation may issue stock bonuses to employees of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors. Any balance left over shall be allocated according to the following principles per resolution of the shareholders' meeting:
1. Except distribution of reserve in accordance with item (2) below, this Corporation shall not pay dividends or bonuses when there is no profit; however, where the legal capital reserve reaches over 50% of the paid-in capital, this Corporation may distribute the amount in excess as dividends and bonuses. Profits may be distributed in total after taking into consideration financial, business and operational factors. Profits of this Corporation may be distributed by way of cash dividend and/or stock dividend.
2. In case there is no profit for distribution in a certain year, or the profit of a certain year is far less than the profit actually distributed by this Corporation in the previous year, or considering the financial, business or operational factors of this Corporation, this Corporation may allocate a portion or all of its reserves for distribution in accordance with relevant laws or regulations or the orders of the authorities in charge.
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Section VI - Supplementary Provisions Article 33 The internal organization of the Corporation and the detailed procedures of business operation shall be determined by the Board of Directors. Article 34 In regard to all matters not provided for in these Articles of Incorporation, the Company Law shall govern. Article 35 These Articles of Incorporation are agreed to and signed on June 9, 2011 by all the promoters of the Corporation.
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Book Values of the Assets and Liabilities of the Transferred Business
In Thousand NTD
August 1, 2011 Item Amount Assets
Current Assets $ 947,592 Long-term Investments 8,438,896 Fixed Assets 2,634,831 Other Assets 206,654 Total Assets (1) 12,227,973 Liabilities Current Liabilities 295,721 Other Liabilities 34,870 Total Liabilities (2) 330,591 Investee’s Equity Adjustments Attributable to TSMC (3) 132,618 Business Value (1)-(2)+(3) $ 12,030,000
Schedule 2
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(Translation-In case of any inconsistencies between the Chinese and English version, the Chinese version shall prevail.)
Taiwan Semiconductor Manufacturing Company, Ltd.
Expert Opinion on the Fairness of the Solar Business Transfer Plan
Taiwan Semiconductor Manufacturing Company, Ltd. (“TSMC”) intends to transfer its existing solar business (including assets, liabilities and operations) (“Solar Business” or the “Transferred Business”) to its wholly owned, newly incorporated subsidiary, TSMC Solar Ltd. (“TSMC Solar”). TSMC Solar will fully assume the Solar Business and, in exchange, issue new shares to TSMC as consideration (the “Transfer”). I. Calculation of the Value of the Transferred Business and the Share Value
Exchanged
1. The business value of the Transferred Business (including assets and liabilities) for which TSMC proposes to transfer, is based on the book value of such assets and liabilities as stated in TSMC’s audited financial statements as of December 31, 2010, as well as taking into account the depreciations thereof, the capital expenditure plan and the forecasted changes in the related accounts up to the record date of the Transfer (“Transfer Record Date”).
2. The book value of the assets of the Transferred Business is
NT$12,227,973,000 and the book value of the liabilities of the Transferred Business is NT$330,591,000. In this regard, the business value of the Transferred Business is NT$11,897,382,000; further, after taking into account the adjustment on shareholders’ equity transferred along with the assets of the Transferred Business (i.e., NT$132,618,000), the business value of the Transferred Business shall turn out to be NT$12,030,000,000. The forecasted book values of the assets and liabilities of the Transferred Business as of the Transfer Record Date are as indicated below:
(In Thousand NTD)
August 1, 2011
Item Amount Assets Current Assets ＄ 947,592 Long-term Investments 8,438,896 Fixed Assets 2,634,831 Other Assets 206,654 Total Assets (1) 12,227,973 Liabilities Current Liabilities 295,721 Other Liabilities 34,870
Schedule 3
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Total Liabilities (2) 330,591 Investee’s Equity Adjustments Attributable to TSMC (3) 132,618 Business Value (1)-(2)+(3) ＄ 12,030,000
Data Source：TSMC
3. TSMC Solar will issue to TSMC a total of 1,203,000,000 common shares, at a
per share price of NT$10, as the consideration for its assumption of the Transferred Business value from TSMC.
II. Fairness of the Value of the Transferred Business and the Share Value
Exchanged
TSMC, through the Transfer, transfers its existing Solar Business (including assets and liabilities) to TSMC Solar, its wholly-owned, newly incorporated subsidiary, and TSMC Solar in turn issues 1,203,000,000 common shares to TSMC as the consideration for its assumption of the net assets of the Transferred Business from TSMC. In this regard, the number of shares to be issued by TSMC Solar in exchange for the Transfer is determined and calculated based on the value of the Transferred Business (including assets and liabilities) of TSMC, and the value of the newly issued common shares of TSMC Solar, which are as detailed below:
1. The Transfer is an internal restructuring of TSMC’s business and organization
rather than an actual transaction. A letter issued by the Accounting Research and Development Foundation on June 14, 2002 (Ref. No. Gi-Mi-Tze-128) (the “ARDF Letter”), provides that, “with respect to the accounting treatments involved in a transfer transaction, if a company (transferor) transfers its businesses to another company (transferee) and obtains such other company’s shares in return, and the transferor and the transferee are affiliates, the transaction thereunder is in the nature of an organizational restructuring. In that regard, the accounting treatments shall be adopted by using net amount of the book value of the assets (if there is any asset impairment, then using the amount after recognition of relevant losses) less the liabilities as the cost for obtaining the equity, and as a result, no gain will be recognized from such exchange by the transferor. The transferee shall use the net amount of transferor’s book value of the assets (if there is any asset impairment, then using the amount after recognition of relevant losses) less the liabilities as a basis to calculate the cost for obtaining the assets and liabilities. The net amount shall also be used as the value of the newly issued common shares, among which, the par value shall be recorded as share capital, and any amount exceeding the par value shall be recorded as capital surplus.” Since TSMC Solar will in turn issue new shares to TSMC as consideration, TSMC’s proposal to transfer based on the net asset book value amount of NT$12,030,000,000 is in accordance with the accounting principles.
2. TSMC Solar issues 1,203,000,000 new shares at a per share price of NT$10 as
the consideration for its assumption of the Transfer and acquires assets with a net value of NT$12,030,000,000, which is equivalent to the book value of
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NT$12,030,000,000 of the Transferred Business of TSMC. As TSMC Solar is a wholly-owned, newly established subsidiary of TSMC, and the value of the Transferred Business is equivalent to the net value of the new shares issued by TSMC Solar, the Transfer value to the share value exchanged shall be deemed reasonable.
III. Impact on Shareholders’ Interests
This Transfer Plan in essence is an internal restructuring of TSMC’s business and organization, where TSMC transfers its existing Solar Business to TSMC Solar. As TSMC Solar is a wholly-owned, newly established subsidiary of TSMC, shareholders of TSMC that own TSMC’s shares would indirectly own TSMC Solar’s shares. In relation to the financial statements of TSMC, since TSMC Solar will be wholly owned by TSMC, and the value of the newly issued shares of TSMC Solar and the value of the Transferred Business are equal, the interests of TSMC’s shareholders would not be materially affected. Moreover, after the Transfer, the profits of TSMC Solar will be recognized as non-operating income, while there will not make any difference when analyzed as part of the consolidated financial statements. In view of the above, this Transfer Plan will have no material affect on the interests of TSMC’s shareholders.
Based on the foregoing, the calculation of the Solar Business (including assets and liabilities) to be transferred by TSMC and the share value exchanged has been based on TSMC’s audited financial statements as of December 31, 2010, as well as taking into account the depreciations thereof, the capital expenditure plan and the forecasted changes in the related accounts up to the Transfer Record Date, and in accordance with the ARDF Letter, wherein TSMC Solar issues 1,203,000,000 common shares to acquire net assets of NT$12,030,000,000. Upon review of the relevant calculation in the forecasted data as of the Transfer Record Date provided by TSMC, we believe that the calculation of the Transfer value to the share value exchanged is fair and reasonable. This opinion is only provided to the board of directors and shareholders’ meeting of TSMC for reference and for reporting to relevant authorities and may not be used for other purposes without prior written consent. First Elite CPAs & Co. LEE MENG-SHIOU, CPA April 25, 2011
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Taiwan Semiconductor Manufacturing Company, Ltd.
Solid State Lighting Business Transfer Plan (translation)
Taiwan Semiconductor Manufacturing Company, Ltd. (“TSMC”) intends to transfer its existing Solid State Lighting business (including assets, liabilities and operations) (“Solid State Lighting Business” or the “Transferred Business”) to its wholly owned, newly incorporated subsidiary, TSMC Solid State Lighting Ltd. (“TSMC Solid State Lighting”), in exchange for the new shares to be issued by TSMC Solid State Lighting to TSMC (the “Transfer”). Pursuant to the Business Merger and Acquisition Law (“BMAL”), the Company Act and other relevant laws and regulations, the plan for the Transfer (this “Transfer Plan”) is as set out below: Article 1: Transfer Method and Participating Companies The Transfer adopts the method of transferring the existing Solid State Lighting Business to a newly incorporated company, i.e., TSMC transfers the relevant business (including assets, liabilities and operations) of its Solid State Lighting Business to TSMC Solid State Lighting, a company to be incorporated after the record date of the Transfer (“Transfer Record Date”), in consideration for TSMC Solid State Lighting’s issuance of new shares to TSMC. The companies that will participate in the Transfer are as follows: Parent company: Taiwan Semiconductor Manufacturing Company, Ltd. Newly-incorporated company to assume the Transferred Business: TSMC Solid State Lighting Ltd. Article 2: Articles of Incorporation of the Newly-Incorporated Company The Articles of Incorporation of TSMC Solid State Lighting are as set out in Schedule 1. Article 3: Business Scope, Business Value, and Assets & Liabilities to be Transferred
by TSMC 1. Business Scope of the Transferred Business:
(1) TSMC’s Solid State Lighting Business. (2) Factory(ies), machineries, equipment, inventory, bank deposits, long-term equity
investments, accounts receivable, accounts payable, and other relevant assets and liabilities (including tangible and intangible assets) required for TSMC’s Solid State Lighting Business.
(3) Agreements (including, but not limited to, sales agreements, technology licensing
agreements, technical services agreements, supply agreements, lease agreements, loan agreements and other relevant agreements), legal actions, legal relationships, legal status, licenses, permits, rights and interests relevant to TSMC’s Solid State Lighting Business. If the transfer of the aforementioned agreements, legal actions,
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legal relationships, legal status, licenses, permits and relevant rights and interests requires consent of the counter party or a third party in accordance with such agreements or relevant laws or regulations, the transfer shall become effective only after consent of the counter party or third party is obtained.
(4) TSMC shall provide TSMC Solid State Lighting the necessary rights under all
technologies, software, know-how, trade secrets and other intellectual property rights owned by TSMC prior to the Transfer Record Date. TSMC and TSMC Solid State Lighting shall cooperate with each other in carrying out the procedures to transfer relevant rights, transfer relevant technologies, and maintain relevant rights, and in providing relevant information, documentation, and programs, all in relation to the aforementioned intellectual property rights, such that the other party may exercise the relevant rights. The transfer of such intellectual property rights under this Paragraph shall not affect any rights licensed to others and the confidentiality obligations in existence prior to the Transfer.
(5) Other assets, liabilities, rights and obligations, interests, entitlement to tax
incentives that are unexpired or undeducted in relation to the Transferred Business, licenses, permits, and relevant legal relationships, factual relationships and status in relation to TSMC’s Solid State Lighting Business.
2. Business Value of the Transferred Business: The business value of the Transferred
Business shall be calculated by deducting the liabilities of the Transferred Business from the assets of the Transferred Business, which is expected to be NT$2,435,600,000.
3. Assets of the Transferred Business: Assets to be transferred are as set out in Schedule 2,
the value of which is expected to be NT$2,563,294,000. 4. Liabilities of the Transferred Business: Liabilities to be transferred are as set out in
Schedule 2, the value of which is expected to be NT$127,694,000. 5. The aforementioned amounts of the business value, and assets and liabilities to be
transferred from TSMC are tentatively based on the book value in TSMC’s audited financial statements as of December 31, 2010, as well as taking into account the depreciations, the capital expenditure plan, and the forecasted changes in related accounts up until the Transfer Record Date. The actual amounts, however, shall still be based on the book value as at the Transfer Record Date.
6. In the event that it is necessary to adjust the aforementioned assets and liabilities to be
transferred, TSMC’s board of directors will be authorized by TSMC’s shareholders at a shareholders’ meeting to make adjustments. The same shall apply if it is necessary to adjust the business value of the Transferred Business and the number of shares to be issued by TSMC Solid State Lighting.
Article 4: Number and Type of Shares to be Issued by TSMC Solid State Lighting,
and the Number and Type of Shares to be Acquired by TSMC in exchange for the Transfer, and the Method of Calculation
1. Number of Shares to be Issued: The business value of the Transferred Business, which
is to be transferred from TSMC and to be assumed by TSMC Solid State Lighting, is
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expected to be NT$2,435,600,000. TSMC Solid State Lighting shall, based on the business value of the Transferred Business to be assumed by TSMC Solid State Lighting, issue 243,560,000 common shares to TSMC at NT$10 per share, whereas TSMC will, in exchange for the Transfer, acquire a total of 243,560,000 common shares to be issued by TSMC Solid State Lighting at NT$10 per share. Should there be any fractional shares which are less than 1 full share, TSMC Solid State Lighting shall, based on the business value of the Transferred Business that is insufficient for exchanging 1 full share of TSMC Solid State Lighting, pay TSMC in cash in a single installment within 30 days after TSMC Solid State Lighting completes its corporate registration of incorporation.
2. Basis of calculation: The aforementioned number of shares to be issued by TSMC
Solid State Lighting in consideration for the Transferred Business is determined in accordance with the book value of the assets and liabilities of the Transferred Business and the fairness opinion concerning the Transfer; details of the fairness opinion are as set out in Schedule 3.
3. TSMC Solid State Lighting shall complete its corporate registration of incorporation
and issue common shares to TSMC after the Transfer Record Date in accordance with applicable laws and regulations. After completion of the Transfer, TSMC will directly hold 100% of the shares of TSMC Solid State Lighting.
Article 5: Adjustment to the Business Value, Assets and Liabilities to be Transferred
by TSMC and the Number of Shares to be Issued by TSMC Solid State Lighting in exchange therefor
In the event that any of the following circumstances is applicable to the value, assets and liabilities of the Transferred Business and the number of shares to be issued by TSMC Solid State Lighting, TSMC’s board of directors will be authorized by TSMC’s shareholders at a shareholders’ meeting to make adjustments: 1. After this Transfer Plan is executed, TSMC acquires assets concerning Solid State
Lighting Business and plans to add such assets to the scope of assets to be transferred; 2. The items or amounts of the assets or liabilities to be transferred vary due to TSMC’s
operations, investment or financing activities; 3. The items or amounts of the assets or liabilities to be transferred vary due to asset
revaluation, depreciation, amortization, addition or impairment; or 4. Other circumstances in which TSMC’s board of directors deems adjustments necessary,
or circumstances in which adjustments are necessary due to changes in laws and regulations or orders by competent authorities.
Article 6: Purchase and Cancellation of Shares held by Dissenting Shareholders In the event that any of TSMC’s shareholders expresses dissent to matters relating to the Transfer or this Transfer Plan, TSMC shall purchase the shares held by such dissenting shareholders according to applicable laws. The shares so purchased shall be disposed of or cancelled pursuant to applicable laws, and the corporate registration shall be amended
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accordingly. Article 7: Issuing Notices and Posting Public Announcement to Creditors 1. Once this Transfer Plan has been approved by TSMC’s shareholders meeting, TSMC
shall promptly prepare a balance sheet and a list of properties, and shall issue notices and make a public announcement to its creditors in respect of this Transfer Plan. Such notices and announcement shall stipulate a period of 30 days or more for creditors to raise objections. If a creditor raises an objection within the stipulated period, TSMC shall undertake relevant measures according to applicable laws and regulations.
2. If the debts repaid by TSMC to the objecting creditors in accordance with the preceding
paragraph are within the scope of this Transfer Plan, TSMC’s board of directors will be authorized to amend the business scope, business value, assets and liabilities of the Transfer stated in Article 3 above; the same applies where it is necessary to adjust the number and price of shares to be issued by TSMC Solid State Lighting.
Article 8: Assumption of Rights and Obligations after the Transfer and the Related
Matters 1. All assets, liabilities and all rights and obligations that are effective and valid on the
Transfer Record Date shall, as of the Transfer Record Date, be transferred from TSMC and be fully assumed by TSMC Solid State Lighting. TSMC shall cooperate in carrying out the relevant transfer procedures.
2. Unless the liabilities arising from the Transferred Business may be separated from
TSMC’s liabilities existing before the Transfer, TSMC Solid State Lighting shall, within the scope of capital contribution in exchange for the Transferred Business, be held jointly and severally liable with TSMC for TSMC’s liabilities incurred prior to the Transfer, pursuant to Section 6, Article 32 of the BMAL. However, a creditor’s right to make claims shall be extinguished if not exercised within 2 years after the Transfer Record Date.
Article 9: Transfer and Retention of Employees In compliance with statutory procedures, TSMC and TSMC Solid State Lighting shall negotiate the employees to be retained and employed by TSMC Solid State Lighting, and inquire such employees of their intention to be retained. TSMC Solid State Lighting shall acknowledge such retained employees’ seniorities in TSMC prior to the Transfer Record Date, or negotiate with such employees, to the extent permitted by relevant laws and regulations, other measures sufficient to protect employees’ rights and interests. Article 10: Transfer Record Date The Transfer Record Date, which is now scheduled on August 1, 2011 provided that, after this Transfer Plan is approved by TSMC’s shareholders at a shareholders’ meeting, in the event that it is necessary to adjust the Transfer Record Date so as to carry out legally required procedures or due to actual needs, TSMC’s board of directors will be authorized to make such adjustments.
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Article 11: Implementation of this Transfer Plan, Expected Completion Date and Solutions for Delays
1. This Transfer Plan will be adopted by TSMC’s shareholders’ meeting on June 9, 2011. 2. In the event that there is any delay or unfinished event of this Transfer Plan and its
expected implementation schedule, TSMC’s board of directors will be authorized, based on the actual circumstances and needs, to schedule the date of a shareholders’ meeting or a board meeting pursuant to relevant laws and regulations, and/or to take other actions as necessary.
Article 12: Allocation of Taxes and Expenses 1. Unless otherwise provided in this Transfer Plan, all taxes or expenses arising out of the
execution or performance of this Transfer Plan shall be borne by TSMC except where relevant tax exemptions or exclusions apply; however, if other laws and regulations provide otherwise, such laws and regulations shall prevail. In the event that this Transfer Plan fails to become effective, by virtue of failing to obtain the approval of TSMC’s shareholders or the competent authorities or any other reason, TSMC shall bear the attorneys’ and accountants’ fees and other related expenses already incurred.
2. TSMC and TSMC Solid State Lighting shall cooperate in applying for any tax benefits
and incentives applicable to the Transfer. Article 13: Change of Paid-In capital of TSMC The paid-in capital of TSMC, unless otherwise decreased by cancellation of shares pursuant to Article 6 of this Transfer Plan or other laws and regulations, shall be maintained and shall not be decreased upon completion of the Transfer. Article 14: Governing Law 1. This Transfer Plan shall be implemented in accordance with the BMAL. In the event of
promulgation and enforcement of new laws that are more favorable to the Transfer, such laws that are more favorable may apply.
2. This Transfer Plan shall be governed and construed in accordance with the laws of ROC.
In the event of any dispute arising from this Transfer Plan, the Hsinchu District Court of Taiwan shall be the competent forum.
Article 15: Miscellaneous 1. If any provision of this Transfer Plan shall be held invalid due to any conflict with any
relevant laws and regulations, only the provision held invalid shall be invalidated, without affecting the validity of any other provisions. The provision which is held invalid due to conflict with relevant laws and regulations shall be modified as permitted by law, by TSMC’s board of directors based on authorization by TSMC’s shareholders.
2. If it is necessary to amend any provision of this Transfer Plan in response to any order
by the competent authorities, such provision shall be amended according to the decision
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of TSMC’s board of directors pursuant to the instruction of the competent authorities. 3. This Transfer Plan shall only become valid and enforceable after it has been approved by
the shareholders’ meeting of TSMC. 4. Any matters not provided under this Transfer Plan shall be governed by relevant laws
and regulations and rulings by the competent authorities. In the event of absence of relevant laws and regulations and rulings by the competent authorities, the board of directors of TSMC will be fully authorized by TSMC’s shareholders at a shareholders’ meeting to handle the relevant matters.
5. An English translation of this Transfer Plan is also prepared for reference; provided,
however, that the interpretation of this Transfer Plan shall be governed by the Chinese version.
6. The Schedules hereto shall constitute an integral part of this Transfer Plan. Taiwan Semiconductor Manufacturing Company, Ltd. Morris Chang Chairman & CEO DATE: April 27, 2011
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ARTICLES OF INCORPORATION
OF
TSMC SOLID STATE LIGHTING LTD.
Schedule 1
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Section I - General Provisions Article 1 The Corporation shall be incorporated, as a company limited by shares, under the Company Law of the Republic of China, and its name shall be 台積固態照明股份有
限公司 in the Chinese language, and TSMC Solid State Lighting Ltd. in the English language. Article 2 The scope of business of the Corporation shall be as follows: 1. CC01080 Electronic Parts and Components Manufacturing 2. CC01040 Lighting Facilities Manufacturing Article 3 The Corporation shall have its head office in Science Based Industrial Park, Hsin Chu, Taiwan, Republic of China, and shall be free, upon approval of government authorities in charge, to set up representative and branch offices at various locations within and without the territory of the Republic of China, wherever and whenever the Corporation deems it necessary or advisable to carry out any or all of its activities. Article 4 Public announcements of the Corporation shall be made in accordance with the Company Law and other relevant rules and regulations. Article 5 The Corporation may provide endorsement and guarantee and act as a guarantor. Article 6 The total amount of the Corporation's reinvestment shall not be subject to the restriction of not more than forty percent of the Corporation's paid-up capital as provided in Article 13 of the Company Law. Any matters regarding the reinvestment shall be resolved in accordance with the resolutions of the Board of Directors.
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Section II - Capital Stock Article 7 The total capital stock of the Corporation shall be in the amount of 11,000,000,000 New Taiwan Dollars, divided into 1,100,000,000 shares, at ten New Taiwan Dollars each, and may be paid-up in installments. Article 8 The Corporation shall print share certificates for shares issued in compliance with relevant provisions of the Company Law and relevant rules and regulations. The share certificates of the Corporation shall all be name-bearing share certificates, and issued in accordance with the Company Law and relevant rules and regulations. Article 9 All transfer of stocks, pledge of rights, loss, succession, gift, loss of seal, amendment of seal, change of address or similar stock transaction conducted by shareholders of the Corporation shall follow the relevant law and securities regulations. Article 10 Registration for transfer of shares shall be suspended thirty (30) days immediately before the date of regular meeting of shareholders, and fifteen (15) days immediately before the date of any special meeting of shareholders, or within five (5) days before the day on which dividend, bonus, or any other benefit is scheduled to be paid by the Corporation. Article 11 Shareholders' meetings of the Corporation are of two types, namely: (1) regular meetings and (2) special meetings. Regular meetings shall be convened, by the Board of Directors, within six (6) months after the close of each fiscal year. Special meetings shall be convened in accordance with the relevant laws, rules and regulations. Article 12 Written notices shall be sent to all shareholders at their latest places of residence as
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registered with the Corporation for the convening of shareholders' meetings, at least twenty (20) days in advance, in case of regular meetings; and at least ten (10) days in advance, in case of special meetings. The purpose(s) for convening any such meeting shall be clearly stated in the written notices sent out to the shareholders. Notices shall be written in Chinese, and English when necessary. Article 13 Except as provided in the Company Law, shareholders' meetings may be held if attended by shareholders in person or by proxy representing more than one half of the total issued and outstanding capital stock of the Corporation, and resolutions shall be adopted at the meeting with the concurrence of a majority of the votes held by shareholders present at the meeting. Article 14 Each share of stock shall be entitled to one vote. Article 15 If a shareholder is unable to attend a meeting, he/she may appoint a representative to attend it, and to exercise, on his/her behalf, all rights at the meeting, in accordance with Article 177 of the Company Law. A representative does not need to be a shareholder of the Corporation. Article 16 The shareholders' meeting shall be presided over by the Chairman of the Board of Directors of the Corporation. In his absence, one of the Directors shall preside in accordance with Article 208 of the Company Law. Article 17 The resolutions of the shareholders' meeting shall be recorded in the minutes, and such minutes shall be signed by or sealed with the chop of the chairman of the meeting. Such minutes, together with the attendance list and proxies, shall be filed and kept at the head office of the Corporation.
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Article 17-1 When there is only one corporate shareholder holding the Corporation, the functions and powers of the shareholders’ meeting shall be carried out by the board of the directors, and the provisions in respect of the shareholders’ meeting in these Articles of Incorporation shall not apply.
Section III – Directors and Supervisor(s) Article 18 The Corporation shall have three Directors and one Supervisor. Article 19 For the election of Directors, each share has the same voting rights equal to the numbers of Directors to be elected, and a shareholder may cast all his/her voting rights to one candidate or among several candidates; those candidates receiving more voting rights shall be elected as Directors. The same applies to the election of Supervisor(s). Article 19-1 When there is only one corporate shareholder holding the Corporation, Directors and Supervisor(s) shall be appointed by such corporate shareholder. Article 20 The term of office for Directors and Supervisor(s) shall be three (3) years, and all Directors and Supervisor(s) shall be eligible for re-election. Article 21 Except as otherwise provided in the Company Law, a meeting of the Board of Directors may be held if attended by a majority of total Directors and resolutions shall be adopted with the concurrence of the majority of the Directors present at the meeting. Article 22 The Directors shall elect from among themselves a Chairman of the Board of Directors
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by a majority in a meeting attended by over two-thirds of the Directors. The Chairman of the Board of Directors shall have the authority to represent the Corporation. Article 23 Except the first Board meeting of every term of the newly elected Board of Directors, which shall be convened by the Director who has received the largest number of votes after such new election, meetings of the Board of Directors shall be convened by the Chairman of the Board of Directors, upon written notice mailed to all the other Directors, at least seven (7) days, unless in case of urgent circumstances, prior to the date of the meeting, specifying the date and place of the meeting and its agenda. The meeting of the Board of Directors shall be held at least once every quarter. Such prescribed notices may be waived in writing by any Director, either before or after the meeting. The meetings of the Board of Directors may be convened, at any time, without such prescribed notice in case of urgent circumstances. Personal attendance at a meeting will represent a waiver of the notice. Any Director attending the meeting via video conference shall be deemed attending the meeting in person. Article 24 The Chairman of the Board of Directors shall preside over all meetings of the Board of Directors. In his absence, any one of the Directors shall be acting for him according to Article 208 of the Company Law. Article 25 A Director may, by written authorization, appoint another Director to attend on his behalf any meeting of the Board of Directors, and to vote for him on all matters presented at such meeting, but no Director may act as proxy for more than one other Director. Article 26 The Directors shall exercise their functions by resolutions adopted at meetings of Shareholders and the Board of Directors. Supervisor(s) may attend the meetings of the Board of Directors without voting rights, unless when performing duties in accordance with relevant laws and regulations.
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Article 27 In the case that vacancies on the Board of Directors exceed, for any reason, one third of the total number of the Directors, then the Board of Directors shall convene a shareholders' meeting to elect new Directors to fill such vacancies in accordance with relevant laws, rules and regulations. Except for the election of new Directors across the board, the new Directors shall serve the remaining term of the predecessors. In case all Supervisor(s) are discharged, the Board of Directors shall convene a shareholders’ meeting to elect new Supervisor(s) in accordance with relevant laws, rules and regulations. Article 28 The Board of Directors is authorized to determine the compensation for the Chairman, Directors and Supervisor(s), taking into account the extent and value of the services provided for the management of the Corporation and the standards of the industry within the R.O.C. and overseas.
Section IV - Management of the Corporation Article 29 The Chairman of the Board of Directors is also the Chief Executive Officer of the Corporation. The Corporation may, by resolution of the Board of Directors, appoint one President and one or more Vice President(s). The aforementioned managers shall perform such duties as designated by the Chairman or the Board of Directors. Article 30 Subject to the provisions of the Company Law and these Articles of Incorporation, all actions of the Corporation's officers shall be in conformance with, and in furtherance of, the directions of the Board of Directors.
Section V - Financial Reports Article 31 The fiscal year for the Corporation shall be from January 1 of each year to December
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31 of the same year. After the close of each fiscal year, the following reports shall be prepared by the Board of Directors, and submitted to the regular shareholders' meeting for acceptance:
1. Business Report;
2. Financial Statements;
3. Proposal Concerning Appropriation of Net Profits or Covering of Losses. Article 32 When allocating the net profits for each fiscal year, the Corporation shall first offset its losses in previous years and set aside a legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve has equaled the total capital of the Corporation; then set aside special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge; and then set aside not less than 1 % as bonus to employees of this Corporation. This Corporation may issue stock bonuses to employees of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors. Any balance left over shall be allocated according to the following principles per resolution of the shareholders' meeting:
1. Except distribution of reserve in accordance with item (2) below, this Corporation shall not pay dividends or bonuses when there is no profit; however, where the legal capital reserve reaches over 50% of the paid-in capital, this Corporation may distribute the amount in excess as dividends and bonuses. Profits may be distributed in total after taking into consideration financial, business and operational factors. Profits of this Corporation may be distributed by way of cash dividend and/or stock dividend.
2. In case there is no profit for distribution in a certain year, or the profit of a certain year is far less than the profit actually distributed by this Corporation in the previous year, or considering the financial, business or operational factors of this Corporation, this Corporation may allocate a portion or all of its reserves for distribution in accordance with relevant laws or regulations or the orders of the authorities in charge.
Section VI - Supplementary Provisions
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Article 33 The internal organization of the Corporation and the detailed procedures of business operation shall be determined by the Board of Directors. Article 34 In regard to all matters not provided for in these Articles of Incorporation, the Company Law shall govern. Article 35 These Articles of Incorporation are agreed to and signed on June 9, 2011 by all the promoters of the Corporation.
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Book Values of the Assets and Liabilities of the Transferred Business
In Thousand NTD August 1, 2011
Item Amount Assets Current Assets $ 311,192 Long-term Investments 3,128 Fixed Assets 2,013,493 Other Assets 235,481 Total Assets (1) 2,563,294 Liabilities Current Liabilities 58,613 Other Liabilities 69,081 Total Liabilities (2) 127,694 Business Value (1)-(2) $ 2,435,600
Schedule 2
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(Translation-In case of any inconsistencies between the Chinese and English version, the
Chinese version shall prevail.)
Taiwan Semiconductor Manufacturing Company, Ltd.
Expert Opinion on the Fairness of the Solid State Lighting Business Transfer Plan
Taiwan Semiconductor Manufacturing Company, Ltd. (“TSMC”) intends to transfer its existing Solid State Lighting business (including assets, liabilities and operations) (“Solid State Lighting Business” or the “Transferred Business”) to its wholly owned, newly incorporated subsidiary, TSMC Solid State Lighting Ltd. (“TSMC Solid State Lighting”). TSMC Solid State Lighting will fully assume the Solid State Lighting Business and, in exchange, issue new shares to TSMC as consideration (the “Transfer”). I. Calculation of the Value of the Transferred Business and the Share Value
Exchanged
1. The business value of the Transferred Business (including assets and liabilities) for which TSMC proposes to transfer, is based on the book value of such assets and liabilities as stated in TSMC’s audited financial statements as of December 31, 2010, as well as taking into account the depreciations thereof, the capital expenditure plan and the forecasted changes in the related accounts up to the record date of the Transfer (“Transfer Record Date”).
2. The book value of the assets of the Transferred Business is NT$2,563,294,000
and the book value of the liabilities of the Transferred Business is NT$127,694,000. In this regard, the business value of the Transferred Business is NT$2,435,600,000. The forecasted book values of the assets and liabilities of the Transferred Business as of the Transfer Record Date are as indicated below:
(In Thousand NTD)
August 1, 2011
Item Amount Assets Current Assets $ 311,192 Long-term Investments 3,128 Fixed Assets 2,013,493 Other Assets 235,481 Total Assets (1) 2,563,294 Liabilities Current Liabilities 58,613 Other Liabilities 69,081
Schedule 3
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Total Liabilities (2) 127,694 Business Value (1)-(2) $ 2,435,600
Data Source：TSMC
3. TSMC Solid State Lighting will issue to TSMC a total of 243,560,000
common shares, at a per share price of NT$10, as the consideration for its assumption of the Transferred Business value from TSMC.
II. Fairness of the Value of the Transferred Business and the Share Value
Exchanged
TSMC, through the Transfer, transfers its existing Solid State Lighting Business (including assets and liabilities) to TSMC Solid State Lighting, its wholly-owned, newly incorporated subsidiary, and TSMC Solid State Lighting in turn issues 243,560,000 common shares to TSMC as the consideration for its assumption of the net assets of the Transferred Business from TSMC. In this regard, the number of shares to be issued by TSMC Solid State Lighting in exchange for the Transfer is determined and calculated based on the value of the Transferred Business (including assets and liabilities) of TSMC, and the value of the newly issued common shares of TSMC Solid State Lighting, which are as detailed below:
1. The Transfer is an internal restructuring of TSMC’s business and organization
rather than an actual transaction. A letter issued by the Accounting Research and Development Foundation on June 14, 2002 (Ref. No. Gi-Mi-Tze-128) (the “ARDF Letter”), provides that, “with respect to the accounting treatments involved in a transfer transaction, if a company (transferor) transfers its businesses to another company (transferee) and obtains such other company’s shares in return, and the transferor and the transferee are affiliates, the transaction thereunder is in the nature of an organizational restructuring. In that regard, the accounting treatments shall be adopted by using net amount of the book value of the assets (if there is any asset impairment, then using the amount after recognition of relevant losses) less the liabilities as the cost for obtaining the equity, and as a result, no gain will be recognized from such exchange by the transferor. The transferee shall use the net amount of transferor’s book value of the assets (if there is any asset impairment, then using the amount after recognition of relevant losses) less the liabilities as a basis to calculate the cost for obtaining the assets and liabilities. The net amount shall also be used as the value of the newly issued common shares, among which, the par value shall be recorded as share capital, and any amount exceeding the par value shall be recorded as capital surplus.” Since TSMC Solid State Lighting will in turn issue new shares to TSMC as consideration, TSMC’s proposal to transfer based on the net asset book value amount of NT$ 2,435,600,000 is in accordance with the accounting principles.
2. TSMC Solid State Lighting issues 243,560,000 new shares at a per share price
of NT$10 as the consideration for its assumption of the Transfer and acquires assets with a net value of NT$2,435,600,000, which is equivalent to the book value of NT$2,435,600,000 of the Transferred Business of TSMC. As TSMC Solid State Lighting is a wholly-owned, newly established subsidiary of
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TSMC, and the value of the Transferred Business is equivalent to the net value of the new shares issued by TSMC Solid State Lighting, the Transfer value to the share value exchanged shall be deemed reasonable.
III. Impact on Shareholders’ Interests
This Transfer Plan in essence is an internal restructuring of TSMC’s business and organization, where TSMC transfers its existing Solid State Lighting Business to TSMC Solid State Lighting. As TSMC Solid State Lighting is a wholly-owned, newly established subsidiary of TSMC, shareholders of TSMC that own TSMC’s shares would indirectly own TSMC Solid State Lighting’s shares. In relation to the financial statements of TSMC, since TSMC Solid State Lighting will be wholly owned by TSMC, and the value of the newly issued shares of TSMC Solid State Lighting and the value of the Transferred Business are equal, the interests of TSMC’s shareholders would not be materially affected. Moreover, after the Transfer, the profits of TSMC Solid State Lighting will be recognized as non-operating income, while there will not make any difference when analyzed as part of the consolidated financial statements. In view of the above, this Transfer Plan will have no material affect on the interests of TSMC’s shareholders.
Based on the foregoing, the calculation of the Solid State Lighting Business (including assets and liabilities) to be transferred by TSMC and the share value exchanged has been based on TSMC’s audited financial statements as of December 31, 2010, as well as taking into account the depreciations thereof, the capital expenditure plan and the forecasted changes in the related accounts up to the Transfer Record Date, and in accordance with the ARDF Letter, wherein TSMC Solid State Lighting issues 243,560,000 common shares to acquire net assets of NT$ 2,435,600,000. Upon review of the relevant calculation in the forecasted data as of the Transfer Record Date provided by TSMC, we believe that the calculation of the Transfer value to the share value exchanged is fair and reasonable.
This opinion is only provided to the board of directors and shareholders’ meeting of TSMC for reference and for reporting to relevant authorities and may not be used for other purposes without prior written consent. First Elite CPAs & Co. LEE MENG-SHIOU, CPA April 25, 2011
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